Capital Gains Tax in India After Budget 2024

Budget 2024 changed capital gains tax more dramatically than any budget in recent memory. The short-term rate on equity jumped from 15% to 20%, and the long-term rate on shares rose from 10% to 12.5% with the exemption lifted from ₹1 lakh to ₹1.25 lakh. And property sellers lost indexation but got a lower rate. If you have sold any asset since July 2024, here is what you need to know, with a capital gains calculator to run your own numbers.

What changed in Budget 2024

The new rules took effect on 23 July 2024, as legislated in Budget 2024 and set out by the Income Tax Department. The big shifts: equity short-term gains went to 20%, equity long-term gains rose to 12.5% with a higher ₹1.25 lakh exemption, property moved to a flat 12.5% without indexation, and debt funds were confirmed as slab-rate taxed. Older calculators and articles that still quote 15% STCG or 20% with indexation on property are simply out of date.

Equity and equity mutual funds

Hold listed shares or equity mutual funds for more than a year and the gain is long-term, taxed at 12.5% on the amount above a ₹1.25 lakh yearly exemption. So if you book ₹1.5 lakh of long-term equity gains in a year, only ₹25,000 is taxed, costing ₹3,125. Sell within a year and the whole gain is short-term, taxed at a flat 20%. The one-year line matters, so check your holding period before you sell.

Grandfathering and the January 31, 2018 rule

Here is a rule that saves long-term equity investors real money, and most people have never heard of it. Long-term capital gains tax on listed shares and equity mutual funds was reintroduced in Budget 2018 after years of being tax-free. To avoid taxing gains that had already built up before that, the law added a grandfathering clause tied to a single date: 31 January 2018.

For any listed equity or equity mutual fund you bought before 31 January 2018, your cost of acquisition for LTCG is not just what you paid. It is the higher of your actual cost or the fair market value on 31 January 2018, and that stepped-up value cannot exceed your actual sale price. In plain terms, the gains that accrued up to that date are protected, and you are taxed only on what your investment gained after it.

A quick example makes it click. Say you bought a stock at ₹100 in 2015. On 31 January 2018 its fair market value, the highest quoted price on a recognised exchange that day, was ₹180. You finally sell in 2026 at ₹250. Without grandfathering your gain would be ₹250 minus ₹100, or ₹150. With it, your cost is treated as ₹180, so your taxable gain is ₹250 minus ₹180, which is just ₹70. On a portfolio of old holdings, that difference in cost base can cut your tax bill sharply.

Two limits are worth pinning down. First, this only applies to listed equity and equity mutual funds. It does not cover property, gold, unlisted shares or debt funds, which follow their own cost rules. Second, it is a permanent provision from Budget 2018, and Budget 2024 left it in place even while changing the LTCG rate to 12.5%. So the January 2018 fair market value still matters for anything you held before that date, as set out by the Income Tax Department under Section 112A.

For mutual funds, the grandfathered value is the fund's net asset value on 31 January 2018 rather than a market quote, but the logic is identical. If you are sitting on units or shares bought before that date, dig out the 31 January 2018 figure before you compute your gain, because using your original purchase price by mistake means you overpay. Run both versions through the capital gains calculator so you apply the higher cost base.

Debt mutual funds

Debt funds lost their special treatment. Whether you hold for one month or ten years, gains are added to your income and taxed at your slab rate, with no indexation benefit. For someone in the 30% bracket that is a meaningful change from the old 20%-with-indexation long-term rate, and it has pushed many investors to compare debt funds against alternatives like FDs and arbitrage funds.

Property and the grandfathering option

Property held over two years is long-term, now taxed at a flat 12.5% without indexation. For property bought on or after 23 July 2024, that is the only option. For property bought before that date, you get a choice: pay 12.5% without indexation, or the old 20% with indexation, whichever is lower. On a long-held property where inflation has run for years, indexation can still win, so it is worth calculating both before you file.

What indexation actually does

Indexation raises your purchase cost in line with inflation, which shrinks the taxable gain. Imagine a flat bought for ₹40 lakh long ago and sold for ₹1 crore. Without indexation the gain is ₹60 lakh, taxed at 12.5% for ₹7.5 lakh. With indexation the cost might be lifted to, say, ₹70 lakh, leaving a ₹30 lakh gain taxed at 20% for ₹6 lakh. Which is lower depends on how long you held and how much prices rose, which is exactly why the grandfathering choice exists.

Setting off capital losses

Losses are not wasted. A long-term capital loss can be set off only against long-term gains, while a short-term loss can offset either short-term or long-term gains. Anything left over carries forward for up to eight assessment years, provided you file your return on time. Harvesting losses thoughtfully near year end can reduce the tax on your winners.

Calculate your capital gains tax

The rules are fiddly, so let the tool do the arithmetic. The capital gains calculator works out whether your gain is long or short term from the dates and applies the right Budget 2024 rate for equity, debt funds, property or other assets. Then fit the result into your wider plan with the salary and tax calculator and review tax-saving options in our PPF vs FD vs ELSS guide.

A simple timing checklist before you sell

A little planning around the sale date can cut your tax bill legally. Before you sell equity, check whether holding a few more days pushes the gain past the one-year mark and into the lower long-term rate. Check whether you have used your ₹1.25 lakh equity exemption for the year, and whether splitting a sale across two financial years lets you use the exemption twice.

Also look at your losses. If you are sitting on a loser, booking it in the same year can offset gains on your winners. None of this is about dodging tax, just about not paying more than the rules require. Run each scenario through the capital gains calculator so you know the number before you click sell, not after.

⚠️Financial Disclaimer: Capital gains rules changed in Budget 2024 (effective 23 July 2024). This article covers common cases and is not tax advice. Special situations and indexation choices may apply. Consult a chartered accountant and verify at incometaxindia.gov.in.