1. LTCG After Budget 2024: A Simplified but Changed Framework
Budget 2024 fundamentally restructured long-term capital gains (LTCG) tax in India, effective 23 July 2024. The pre-Budget framework had different rates and indexation for different assets -- 20% with CII indexation for property and gold, 10% for listed equity. The post-Budget framework is simpler: 12.5% LTCG for virtually all asset classes without indexation. The key complexity now lies in the grandfathering option for assets acquired before 23 July 2024, which allows choosing between the new 12.5% rate and the old 20% with indexation.
2. Post-Budget 2024 LTCG Framework
| Asset | LTCG Holding Period | New Rate (post-July 23, 2024) |
|---|---|---|
| Listed equity / equity MF | 12 months | 12.5% (Rs 1.25L exempt) |
| Immovable property | 24 months | 12.5% (no indexation) |
| Unlisted equity shares | 24 months | 12.5% (no indexation) |
| Gold / jewellery | 24 months | 12.5% (no indexation) |
| Debt mutual funds | N/A -- slab rate always | Slab rate (Finance Act 2023) |
3. The Grandfathering Option: Pre-July 2024 Assets
For assets acquired BEFORE 23 July 2024, taxpayers can choose when selling:
- Option 1: 12.5% without indexation (new rate)
- Option 2: 20% with CII indexation (old rate -- available for pre-July 2024 assets only)
- Choose whichever results in LOWER TAX -- compute both every time
4. When Indexation Wins: Long-Held Property Example
Illustrative only. Property bought in FY 2009-10 for Rs 40 lakh, sold in FY 2026-27 for Rs 1.8 crore. Assumed CII: 2009-10 = 148; 2026-27 = 400.
- Indexed cost = Rs 40L x (400/148) = Rs 1.081 crore
- LTCG with indexation = Rs 1.8 crore - Rs 1.081 crore = Rs 71.9 lakh at 20% = Rs 14.38 lakh tax
- LTCG without indexation = Rs 1.8 crore - Rs 40 lakh = Rs 1.4 crore at 12.5% = Rs 17.5 lakh tax
- Decision: 20% with indexation is better (Rs 14.38L tax vs Rs 17.5L)
5. When 12.5% Wins: Recently Acquired Asset
Illustrative only. Property bought in FY 2022-23 for Rs 80 lakh, sold in FY 2026-27 for Rs 1.2 crore. CII: 2022-23 = 331; 2026-27 = 400.
- Indexed cost = Rs 80L x (400/331) = Rs 96.7 lakh
- LTCG with indexation = Rs 1.2 crore - Rs 96.7L = Rs 23.3L at 20% = Rs 4.66L tax
- LTCG without indexation = Rs 1.2 crore - Rs 80L = Rs 40L at 12.5% = Rs 5L tax
- Decision: 20% with indexation is marginally better here too (Rs 4.66L vs Rs 5L)
6. Listed Equity: Section 112A
The most commonly encountered LTCG provision for investors:
- Rate: 12.5% on gains above Rs 1.25 lakh annual exemption
- STT must have been paid (with exceptions for IPO allotments, rights/bonus)
- 12-month holding period
- Rs 1.25L exemption is per taxpayer annually -- both spouses get their own Rs 1.25L
- Annual LTCG harvesting: sell enough units each March to crystallise Rs 1.25L LTCG and immediately repurchase -- shelters Rs 1.25L permanently
7. Property Capital Gains: Practical Workflow
When selling property acquired before 23 July 2024:
- Determine cost of acquisition (original purchase price + stamp duty + registration + improvement costs)
- Compute indexed cost: cost x (CII of sale year / CII of purchase year)
- Compute LTCG with indexation at 20%
- Compute LTCG without indexation at 12.5%
- Choose lower tax result
- File Schedule CG in ITR with chosen method
8. Capital Loss Set-Off Rules
- Long-Term Capital Loss (LTCL): can be set off ONLY against LTCG (not STCG, salary, business)
- Short-Term Capital Loss (STCL): can be set off against BOTH STCG and LTCG
- Carry-forward period: 8 assessment years
- Year-end strategy: book loss positions before 31 March to crystallise LTCL for offset
9. Debt Funds: No LTCG Benefit
Finance Act 2023 removed LTCG for debt mutual funds -- all gains are now at slab rate regardless of holding period. This is separate from Budget 2024 changes. The 12.5% rate does NOT apply to debt funds -- they remain at slab rate irrespective of holding period.
10. Why TaxClue
LTCG computation -- grandfathering option analysis, indexed cost calculation, and accurate Schedule 112A/CG reporting -- requires careful computation for each asset. TaxClue handles capital gains ITR filing. Contact us.