FAQ on Capital Gain Tax Changes: In the full budget of the current financial year 2024-25, Union Finance Minister Nirmala Sitharaman announced a major change regarding the capital gains. Now a capital gain is of long term or short term, for this, only two holding periods- 12 months and 24 months will be decided. Apart from this, tax rates have been equal for most assets. The benefits of indexation in the budget have been abolished. However, a discount limit of Rs 1 lakh has been increased to Rs 1.25 lakh for long -term capital gains (LTCG) on assets like listed shares and mutual funds.
Short Term Capital Gain (STCG) tax has been increased to 20 per cent, and LTCG tax is now 12.5 per cent. Apart from this, Securities Transaction Tax (STT) has been increased from 0.1 per cent to 0.2 per cent for the purchase and sale of shares. If you still do not understand, the Central Board of Direct Taxes (CBDT) has released the FAQ in which all the questions will be answered.
First question- What are the changes in the taxation of capital gains?
answer- The tax system on capital gains has been made simplified on five parameters. The holding period is now only two i.e. the capital gan is short or long, it will be fixed only with one year and two -year holding period. Tax rates for most assets have been equal. Indexation has been removed to ease calculation and rates have been reduced from 20 per cent to 12.5 per cent. The difference between residential and non-residential was removed. There has been no change in roll over benefits.
Second question- When will the new provisions of tax implement or have been done?
answer- The new provisions of Capital Gain will be applicable from July 23, 2024 and will be applicable to any transactions done on or after July 23, 2024.
Third question- How is the holding period easier?
answer- Earlier, the holding for some assets was considered only after the completion of three years. However, now only two holding periods are one year and two years. It is only one year for listed securities, while the rest of the assets will be long -term after holding for two years.
Fourth question- Who will benefit from change in holding period?
answer- The holding period of all listed assets will now be one year. In such a situation, the holding period for listed units of Business Trusts, Invits has been 36 months to 12 months. The holding period of Gold and Unlisted Securities (apart from unlisted shares) has also been 36 months to 24 months.
Fifth question- What is the holding period of real estate and unlisted stocks?
answer- The holding period of real estate and unlisted stocks is 24 months as before.
Sixth question- What has been changed in the capital assets on which STT has to be given?
answer- Listed Equity, Equity-Mutual Fund and Business Trusts (Section 111A) have been reduced to 15 per cent to 20 per cent of the tax rate on short-term capital gains. At the same time, the tax rate on the long term capital gains (section 112A) of these assets has been reduced from 10 percent to 12.5 percent.
Seventh question- There has been any change in the exemption limit of long -term capital gains under section 112A?
answer- Absolutely. Earlier there was no tax on long term capital gains up to 1 lakh rupees. Now it has been reduced to Rs 1.25 lakh.
The eighth question-What are the changes about tax on the long term capital gains?
answer- Under Section 112, the tax rate of profit without indexation has been reduced to 12.5 per cent under section 112. Earlier it was at 20 per cent and there was also an advantage of indexation. This will make tax calculation easier.
The ninth question- Who will benefit from removing the indexation rate by 20 percent to 12.5 percent?
answer- Taxpayers will get a big benefit in most cases. However, where the gains have decreased compared to inflation, the profit in some cases may be limited.
Tenth question- Will the roll over facility continue on capital gains?
answer- There has been no change in roll over benefits. It remains as before.
Eleventh question- In which assets can long-term capital gains be invested for roll over benefits?
answer- For roll over benefits, taxpayers can invest their profits in special bonds under section 54 or section 54F under section 54F. The entire details related to this can be seen in sections 54, 54B, 54D, 54EC, 54F, 54G of the IT Act.
Twelfth question- How much amount can you get roll over benefits?
answer- Capital gains of up to Rs 50 lakh can be invested in 54 EC bonds and in the rest of the cases the capital gains have been excluded from tax with certain conditions.
Thirteenth question- What is the overall means of these changes?
answer- Making any tax structure easier has many advantages such as tax calculation will be easy, filing will be easier and it will also be easy to maintain records. Apart from this, the mess of calculating tax at different rates for different assets will end.