Understanding India’s New Capital Gains Tax Rules (2024–25): A Guide for Investors 

Budget 2024 rewired how India treats gains from most financial and non‑financial assets. These include equity, debt, gold, real estate, and even unlisted and foreign holdings. The center of gravity shifted to a cleaner, uniform structure, with sharper edges for short‑term trading and clearer thresholds for long‑term investors.  

In fact, retail readers and HNIs needed updated clarity. This is because cross‑asset portfolios are complex. Hence, LTCG and STCG tax rate understanding is necessary. 

Evolution of LTCG and STCG Tax Rate Framework 

For years before 2018, long‑term equity gains were exempt. Then, the 2018 Budget introduced a 10 percent LTCG on listed equity and equity‑oriented funds with fair market value above ₹1,00,000.

It included a grandfathering cushion pinned to the January 31, 2018, fair market value. That was the first big break from the old comfort zone.  

The second break arrived on July 23, 2024. Then, long‑term gains are standardized to 12.5 percent for many asset classes. Short‑term gains on specified listed financial assets shifted to 20 percent. The exemption on listed equity LTCG moved up to ₹1,25,000 from FY 2024‑25. Now, this is the operative baseline. 

Key Definitions 

A capital asset is any property held, securities included, except for a few exclusions by law. Holding period splits your gain into short‑term or long‑term buckets: 

• For listed equity and equity MFs, more than 12 months is long-term.  

• For unlisted shares and most non‑financial assets, more than 24 months is long-term after the 2024 refresh.  

The difference between recognized exchange transactions and off‑market transfers matters. When trades happen on an exchange, and STT is paid, special sections apply.

Also, when shares move off‑market without STT, you are often back under general capital gain rules, with different rates, frequently 20 percent for LTCG on such transfers. 

New LTCG Rules Applicable from July 23, 2024 

The following are the new LTCG rules applicable from July 23, 2024: 

1. Revised Tax Rates for Listed Equity & Equity Mutual Funds 

The numbers changed. From 10 percent to 12.5 percent for long‑term gains. The holding period stayed at 12 months. The exemption was raised to ₹1,25,000 per financial year for listed equity and equity MFs, effective from FY 2024‑25.  

Before July 23, 2024, sales were still at 10 percent for the taxable slice above the exemption. However, post‑July sales are at 12.5 percent.  

The comparison table below helps. 

Item	Before July 23, 2024	On/After July 23, 2024
LTCG Rate on Listed Equity/Equity MFs	10%	12.5%
Exemption Limit per FY	₹1,25,000 from Apr 1, 2024	₹1,25,000 continues
Holding Period for LTCG	12 months	12 months

2. Updated Grandfathering Clause Computation 

Grandfathering did not disappear after the revised tax rules. For instance, if you bought pre‑2018 and sold later, compute cost using the higher of the actual cost, the lower of Jan 31, 2018 FMV and the sale price, and the sale price. This prevents artificial long‑term losses when the sale price falls below the 2018 FMV.  

The following are some worked examples: 

Case one. Bought in 2015 at ₹500. The FMV on Jan 31, 2018, was ₹700. It was then sold in 2024 at ₹1,000. Then, the taxable long‑term gain is ₹300, not ₹500.  

Case two. If sold at ₹650, you cannot book a loss versus ₹700. In certain interpretations, the sale price becomes your new cost base for future holdings. This makes it effectively tax-neutral on that leg. This is the kind of detail investors still overlook. 

New STCG Rules Post‑Budget 2024 

The following are the new STCG rules after the budget 2024: 

1. Increased STCG Tax on Listed Equity 

The short-term got heavier after the 2024 budget. The 15 percent rate jumped to 20 percent for specified listed financial assets, such as equities and equity MFs, from July 23, 2024.  

The impact is felt most by frequent delivery traders, short‑holding swing participants, and folks who realize gains within 12 months.

Margins compress when you factor in both the higher rate and the shift in STT on F&O, pushing net realization down by a notch again. 

2. Scenarios Where STCG Slab Rates Still Apply 

Not every short‑term gain goes under the 20 percent bucket. For unlisted shares, foreign stocks, listed bonds in some cases, and most debt instruments, short‑term gains may still be taxed at your slab rate. 

The map is uneven and requires a lookup by asset type and STT applicability. Keep this in mind when your portfolio holds overseas brokers’ accounts or privately issued securities. 

Asset‑Class‑Wise Capital Gains Overhaul 

The following are some asset-wise capital gains: 

1. Listed Equity & Equity MFs/ETFs 

The core rules are visible now. LTCG at 12.5 percent after July 23, 2024, with an exemption of ₹1,25,000. Also, STCG is at 20% for listed equities and equity MFs. Meanwhile, the holding period for long-term remains 12 months.  

For tactical traders, this increases the hurdle rate on short‑term allocations. However, for long‑term investors, the exemption still offers room for planned harvesting. 

2. Debt Mutual Funds & Debt ETFs 

This leg is more austere than most investors expected. Essentially, gains from debt funds and many debt ETFs are taxed at slab rates. This happens regardless of holding period, with indexation benefits essentially gone for new investments.  

This was an earlier Budget move, tightened through 2024 clarity. This made debt funds behave more like fixed-income funds for tax purposes. Now, asset selection tilts toward post‑tax yield rather than vintage-indexation perks. 

3. Gold & Silver ETFs and Physical Gold 

Gold and silver ETFs are treated more like listed financial assets for rate purposes, with a revised long‑term rate and a 12‑month threshold in the ETF wrapper.  

Physical gold aligns with non‑financial assets, expecting a 24‑month holding period for long-term under the simplified structure. For family portfolios, this reduces confusion but still demands better record-keeping. 

4. Real Estate (Residential & Commercial) 

Property transactions now plug into the simplified grid. Meanwhile, the long‑term rate sits at 12.5 percent. In this case, the holding period is 24 months for long-term.  

Improvement costs and certain transfer expenses remain allowable when computing indexed or adjusted costs, as relevant under the updated matrix.

However, indexation, as a concept, was simplified away for several classes. In practice, documentation and timing drive outcomes as much as rate labels do here. 

5. Unlisted Shares, Bonds & Foreign Securities 

The reset matters for startup equity, ESOPs, pre‑IPO holdings, and overseas brokerage accounts. While long‑term gains trend at 12.5 percent with a 24‑month holding period, short‑term gains usually fall back to slab rates.  

This aligns incentives toward longer holding cycles for private market allocations. Moreover, rebalancing decisions should weigh potential exit windows against the tax step‑up. 

Additional Tax Considerations Investors Often Miss 

The following are some of the major other tax considerations investors miss from time to time: 

1. Section 87A: How Rebate Actually Applies (and Doesn’t Apply)? 

In general, people frequently make this mistake. If total income is within the ₹7,00,000 new‑regime threshold, you may think the rebate wipes taxes clean. It does not neutralize tax on LTCG under Section 112A above the exemption or STCG under Section 111A.  

The rebate can apply to other income, not these specific compartments. This distinction is crisp in practitioner threads and clarifications. Moreover, stick to it, because it changes the filing strategy. 

2. STT (Securities Transaction Tax) Changes 

F&O got costlier at the margin: 

• Options STT rose to 0.10 percent of the premium.  

• Futures to 0.02 percent of notional.  

Even if your directional call plays out, net after tax and STT comes in thinner. This nudges many intraday or weekly traders toward fewer, higher‑conviction bets or toward longer holding for delivery positions. It is not headline huge, but it compounds. 

3. Off‑Market Transfers and Their Tax Rates 

When shares move outside the exchange, and STT is not paid, the special equity rates usually do not apply. In this case, long‑term capital gains can be taxed at 20 percent, unlike the listed pathway.  

In general, founders doing family re‑alignment, ESOP transfers, or private placements see this more often than retail investors do. So, knowing this in advance avoids unpleasant surprises. 

4. Buyback Taxation Shift (Budget 2024) 

Tax now sits directly with the investor, treating receipts akin to capital gains. In contrast, the buyback outflow on the company side can be treated as a capital-loss framework element for set‑off in certain circumstances. 

This bends the calculus of buyback participation and dividend preference. Also, context from the post‑Budget coverage is consistent on this shift. 

How to Compute Capital Gains Under the New Regime? 

You do not need literal flowcharts to compute the basics, but you do need a sequence: 

1. Equity first. Identify holding period. Then, apply an exemption for listed LTCG up to ₹1,25,000. Tax residual at 12.5 percent if sold on or after July 23, 2024. For the short term, use 20 percent if listed equity is available.  

2. Debt next. Gains taxed at slab rates, no indexation in most new cases.  

3. Real estate next. Apply a 24‑month test for the long term, then a 12.5 percent rate. Gold and silver. Distinguish between ETF and physical for the holding threshold.  

4. Unlisted equities. Run the 24‑month test and apply the standardized rates per the new matrix.  

5. Make sure to keep a ledger for each lot. 

Mixed‑Period Sale Scenarios 

You might have bought before April 1, 2024, and sold after July 23, 2024. Then, long‑term listed equity falls under the 12.5 percent rate for the taxable slice, still eligible for the ₹1,25,000 exemption. In fact, SIP investors hold dozens of lots, each with its own acquisition date and holding period.  

The FIFO method in many reports can change which units cross the 12‑month line. That subtlety affects both rate application and whether your LTCG and STCG tax rate plan holds in practice. 

Tax Planning and Optimization Strategies 

The following are the factors you must consider to plan and optimize your taxes in the right manner: 

1. Use the ₹1,25,000 LTCG Exemption Smartly 

The exemption is not a trophy, but a tool. You need to space out sales of long‑term listed equity across the financial year to fill the ₹1,25,000 bucket without crossing it, especially when you are rebalancing from overheated sectors. This can shave effective tax across years. Also, avoid impulsive exits in the same year if you already consumed the exemption. 

2. Loss Harvesting for STCG and LTCG 

In general, losses offset gains within the same head first, then across heads where allowed. Also, carry‑forward rules can extend relief into future years. 

Also, documentation and audit trails remain essential. So, do not cut corners with contract notes and demat statements. 

3. Portfolio Rebalancing Under New Tax Rules 

With short‑term rates higher and some asset classes on slab rates, the math tilts more in favor of patient holding: 

• Debt allocations pivot to post‑tax yield calculations rather than nostalgia for indexation.  

• Equity becomes less favorable to fast churn and more productive with staggered harvesting.  

Basically, the broader implication is to define holding‑period targets upfront. Moreover, adjust if volatility hands you a gift, but keep the discipline. 

Go for a Single Narrative! 

From July 23, 2024, onward, listed equity and equity funds face a 12.5 percent long-term rate above a sensible exemption, and a 20 percent short-term rate. Moreover, debt is under slab rates. Also, real estate and unlisted assets are at 12.5 percent for long-term with 24‑month gates.  

So, you must plan for holding periods, stagger exits, and document costs. If you hit a knot, use calculators and speak to a professional. Your portfolio deserves precision when rules change mid‑stride.  

Also, keep checking sources that map the current grid, including the post‑Budget explainers and brokerage primers reflecting the updated LTCG and STCG tax rate framework, because small details often drive big-money outcomes. 

Frequently Asked Questions (FAQs) 

The following are some common questions regarding the LTCG and STCG tax rate framework: 

1. Is the Section 87A Rebate Applicable to LTCG or STCG on Equity? 

The rebate under Section 87A cannot offset tax on LTCG under Section 112A beyond the exemption or STCG under Section 111A. However, it may apply to other income up to the threshold when eligible, but not to these specific capital‑gain buckets. 

2. What LTCG Rate Applies If I Purchased Shares in 2017 But Sold Them in 2024 After the Rule Change? 

If sold after July 23, 2024, long‑term listed equity is taxed at 12.5 percent on the taxable slice after using the ₹1,25,000 exemption. Also, grandfathering still applies for determining the effective cost using the Jan 31, 2018, FMV rule. 

3. Do SIP Investments Get Separate Tax Treatment for Each Installment? 

Yes, each SIP unit has its own acquisition date. As a result, its holding period is separate. That decides whether a redeemed unit is short-term or long-term. Tracking lots and FIFO in statements is essential before applying the rate. 

4. Are Debt Mutual Funds Still Eligible for Indexation Benefits? 

For most new investments, debt mutual funds are taxed at slab rates with indexation benefits removed under recent changes. That is why post‑tax yield analysis is back in the spotlight. So, align selection with your tax bracket and horizon. 

5. Does the New ₹1,25,000 Exemption Apply to All Assets or Only Equity? 

The ₹1,25,000 exemption applies to long-term gains on listed equity and equity funds. Other asset classes follow their own matrices and do not carry this specific exemption. Moreover, always verify by asset type before planning exits.