Disclaimer:
This blog is prepared based on the taxation rules in India as of 2024, with specific reference to the Union Budget 2024-2025 (i.e., April 1, 2024 – March 31, 2025). The information provided is for educational purposes only.
It is highly recommended to consult the latest budget updates and seek advice from your Chartered Accountant (CA) or financial advisor before making any decisions related to Capital Gains and taxation.
While there are minimal changes with every budget release, it is crucial to stay updated with the latest developments and amendments.
This Blog has been updated by CA - Sai Manoj
Capital Gain and Taxes
What is Capital Gain
What is Indexation?
Indexation is a method used to adjust the purchase price of an asset to account for inflation, reducing the taxable capital gain. It helps taxpayers pay less tax on profits earned from the sale of long-term assets.
Scenario: You purchased a property in 2015 for ₹50 Lakhs.
Selling Price: You sold it in 2024 for ₹1 Crore.
Inflation Adjustment: Using the Cost Inflation Index (CII), the value of ₹50 Lakhs in 2024 terms becomes ₹75 Lakhs.
Without Indexation:
Your profit (Capital Gain) would be:
₹1 Crore - ₹50 Lakhs = ₹50 Lakhs (This amount is taxable).
With Indexation:
Your profit is adjusted for inflation:
₹1 Crore - ₹75 Lakhs = ₹25 Lakhs (This is the Taxable Capital Gain).
By using indexation, the taxable gain is reduced from ₹50 Lakhs to ₹25 Lakhs, saving you a significant amount in taxes.
Let us understand the taxes Imposed after 23rd July 2024 with Table below
| Income From | Long Term | Tax for Long Term | Short Term | Tax for Short Term |
|---|---|---|---|---|
| House Property | More than 24 months | 12.5% (no indexation) | Up to 24 months | Slab Rates |
| Domestic Equity | More than 12 months | 12.5% over and above ₹1.25 lakhs | Up to 12 months | STT applicable: 20% If not: Slab rates |
| US Equity | More than 24 months | 20% no indexation | Up to 24 months | As per income tax slab rate |
| Equity Oriented Mutual Funds (Equity 65%, Debt 35%) |
More than 12 months | 12.5% over and above ₹1.25 lakh without indexation | Up to 12 months | 20% |
| Debt Oriented Mutual Funds (Debt 65%, Equity 35%) |
More than 12 months | Slab Rates | Up to 12 months | Slab Rates |
| Sovereign Gold Bonds | More than 12 months | 12.5% Exempt when redeemed through RBI window or if held till 8 years |
Up to 12 months | Slab Rates |
| Digital Gold, Gold MF, ETF | More than 12 months | 12.5% Exempt when redeemed through RBI window or if held till 8 years |
Up to 12 months | Slab Rates |
| Cryptocurrency | NA | 30% | NA | 30% |
| Share Equity, Unlisted Shares (Not under BSE or NSE) |
More than 12 months | 12.5% Exempt when redeemed through RBI window or if held till 8 years |
Up to 12 months | Slab Rates |
In case of Investments, if your profit is nearing 1.25 lakh, Redeem and Re -Invest to save taxes
for example, You invested 2 lakhs in a stocks, And Stock Started Booming and you got a profit of 1.25 Lakh, Now you have 2Lakh + 1.25 Lakh = 3.25 Lakh, Redeem Account and Re-Invest 3.25Lakh, Now 3.25 Lakh will be your investment amount, Not 2 Lakh
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