Finance Act 2024 amendments effective 23 July 2024 · AY 2026-27 · By ASAS & Associates / KarSahi

Capital gains tax is one of the most complex areas of Indian income tax law, not because the concept is difficult, but because the rules differ significantly across asset classes — and they changed substantially with the Finance Act 2024 effective from 23rd July 2024. Whether you have sold a house, redeemed mutual funds, exited a stock position, sold gold jewellery, or traded in futures and options, the tax treatment depends on what you sold, how long you held it, and when the transaction occurred.

The Fundamental Distinction: STCG and LTCG

Capital gains are classified as either short-term or long-term based on the holding period — the time between acquisition and sale. Short-term capital gains (STCG) arise when an asset is sold within the prescribed holding period and are generally taxed at higher rates. Long-term capital gains (LTCG) arise when the asset has been held beyond the threshold and typically attract lower tax rates. The holding period threshold varies by asset class, as does the tax rate.

Listed Equity Shares and Equity-Oriented Mutual Funds

For listed equity shares and equity-oriented mutual funds (including hybrid funds with 65% or more equity exposure), the Finance Act 2024 made significant changes. If you sell within 12 months, the gain is short-term and taxed at 20% — up from the earlier 15%. If you hold for more than 12 months, the gain is long-term and taxed at 12.5%, without the benefit of indexation. The annual exemption threshold for LTCG under Section 112A was enhanced from ₹1 lakh to ₹1.25 lakh — meaning the first ₹1.25 lakh of long-term gains from equity each year is tax-free.

For unlisted equity shares, the holding period threshold for LTCG is 24 months. Short-term gains are taxed at slab rates. Long-term gains are taxed at 12.5% without indexation following the Finance Act 2024 amendments.

Residential and Commercial Property

The Finance Act 2024 brought a significant change for real estate. Prior to 23rd July 2024, long-term capital gains on property (held for more than 24 months) were taxed at 20% with the benefit of indexation — meaning your cost was adjusted upward for inflation, reducing the taxable gain. Post 23rd July 2024, LTCG on property is taxed at 12.5% without indexation.

However, for property acquired before 23rd July 2024, a grandfathering provision exists. You can choose whichever is more beneficial: 20% tax with indexation, or 12.5% tax without indexation. Your chartered accountant will calculate both options and apply the lower tax figure. Short-term gains on property — from sales within 24 months of acquisition — continue to be taxed at your applicable slab rate as they are added to your total income.

Commercial property follows the same rules as residential property for capital gains purposes. The 24-month threshold applies, and the post-July 2024 rate of 12.5% without indexation is the default for new acquisitions.

Agricultural Land        

Rural agricultural land is not considered a capital asset under Section 2(14) of the Income Tax Act. This means gains from the sale of rural agricultural land are entirely exempt from capital gains tax — there is nothing to declare, nothing to pay. The definition of rural land depends on distance from the nearest municipality and population thresholds specified in the law.

Urban agricultural land, however, is a capital asset and is subject to capital gains tax. Short-term gains (held less than 24 months) are taxed at slab rates. Long-term gains attract 12.5% without indexation. There is a specific exemption available under Section 54B: if you reinvest the long-term gains from urban agricultural land into another agricultural land within two years, the gain is exempt to the extent of the reinvestment.

Gold, Silver, and Jewellery

Physical gold, silver, and jewellery are subject to the same capital gains treatment as real estate after the Finance Act 2024 changes. If sold within 24 months, gains are short-term and taxed at slab rates. If held beyond 24 months, gains are long-term and taxed at 12.5% without indexation.

Sovereign Gold Bonds issued by the Reserve Bank of India receive preferential treatment. If you hold them to maturity (8 years), the redemption proceeds are entirely exempt from capital gains tax for an individual investor. If you sell or transfer before maturity, gains are taxed at 12.5% LTCG if held for more than 12 months. Gold ETFs and Gold Funds of Funds are treated as non-equity funds, and their tax treatment follows the rules for debt-oriented instruments — more on that in the bonds section below.

Bonds and Debentures

For listed bonds and debentures, the holding period for LTCG is 12 months. STCG is taxed at slab rates. LTCG is taxed at 12.5% without indexation following the Finance Act 2024 amendments. For unlisted bonds and debentures, the holding period extends to 36 months before gains qualify as long-term. STCG is at slab rates; LTCG is at 12.5% without indexation.

Tax-free bonds issued by government entities like NHAI and REC pay interest that is exempt from income tax. However, if you sell these bonds in the secondary market before maturity, any capital gain is taxed normally — at 12.5% LTCG if held for more than 12 months.

Section 54EC bonds issued by NHAI and REC offer a capital gains exemption for long-term gains from any asset: invest up to ₹50 lakh in these bonds within six months of the transfer, and the gain is exempt up to the amount invested. These bonds have a mandatory lock-in of five years.

Futures and Options (F&O) and Intraday Trading

Futures and Options trading income is not treated as capital gains in India. It is classified as business income — specifically non-speculative business income — and is taxed at your applicable slab rate. You are required to prepare a profit and loss statement. If your turnover from F&O trading exceeds ₹10 crore in a financial year, a tax audit under Section 44AB is mandatory. Below this threshold, an audit may still be required if you declare a loss and wish to carry it forward.

Intraday equity trading — buying and selling shares on the same day — is classified as speculative business income. It is also taxed at slab rates, but the loss treatment is different: speculative losses can only be set off against speculative gains, not against other business income. This distinction matters enormously when planning your tax position.

ETFs, REITs, and InvITs

Equity ETFs tracking indices like Nifty 50 or Sensex are treated as equity-oriented instruments. Gains on equity ETFs held for more than 12 months are LTCG taxed at 12.5% with the ₹1.25 lakh annual exemption. Short-term gains on equity ETFs are taxed at 20%. Debt ETFs and international fund of funds are treated as non-equity instruments — gains on debt ETFs held for more than 24 months are taxed at 12.5% without indexation.

Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) listed on Indian stock exchanges are treated similarly to equity for capital gains purposes. Gains on units held for more than 12 months attract 12.5% LTCG; short-term gains attract 20%.

Foreign Shares and International Investments

Resident Indians who have invested in foreign shares — whether directly through platforms like Vested or Stockal, or through RSUs and ESOPs from multinational employers — face a more complex tax situation. Foreign shares are treated as unlisted equity for capital gains purposes. If sold within 24 months, gains are short-term and taxed at slab rates. If held for more than 24 months, gains are long-term and taxed at 12.5% without indexation. Additionally, these investments must be disclosed in Schedule FA (Foreign Assets) of your ITR-2 or ITR-3 every year, even if there are no gains to report.

Virtual Digital Assets — Crypto and NFTs

Cryptocurrency, NFTs, and all other virtual digital assets (VDAs) are subject to a flat 30% tax on gains under Section 115BBH, with no deduction allowed for any expense other than the cost of acquisition. You cannot set off losses from one VDA against gains from another, and losses from VDAs cannot be set off against any other income. There is also a 1% TDS deducted on every sale transaction exceeding ₹50,000 (₹10,000 for certain transactions) under Section 194S, which you can claim as a credit when filing your ITR.

Setting Off and Carrying Forward Capital Losses

Losses from capital assets can be used to reduce your tax liability, but strict rules govern which losses can offset which gains. Short-term capital losses can be set off against both short-term and long-term capital gains. Long-term capital losses can only be set off against long-term capital gains. Any unabsorbed capital loss can be carried forward for up to eight assessment years, provided you file your ITR before the due date. Capital losses cannot be set off against income from salary, business, house property, or any other head of income.

KarSahi handles capital gains across all asset classes in one session — correct classification, loss set-off, exemption claims, and AIS reconciliation. Book at karsahi.com.