Union Budget 2024-25: Major Updates to Capital Gains Tax with New Long-Term Rates and Increased Exemption Limits

New Delhi: The Union Budget 2024-25, presented by Union Finance and Corporate Affairs Minister Nirmala Sitharaman, has introduced significant changes to the Capital Gains Tax framework, aiming to simplify and rationalize the tax structure.

Under the new proposal, short-term gains on certain financial assets will be taxed at a flat rate of 20%. This change aligns the taxation of these assets with a more straightforward rate while maintaining the existing rates for other financial and non-financial assets.

For long-term gains, a unified tax rate of 12.5% is proposed for both financial and non-financial assets. To support lower and middle-income groups, the exemption limit on capital gains for specific financial assets will be increased from ₹1 lakh to ₹1.25 lakh annually.

In terms of asset classification, listed financial assets held for over one year will be categorized as long-term. In contrast, unlisted financial assets and all non-financial assets must be held for a minimum of two years to qualify for long-term tax treatment.

Additionally, Smt. Sitharaman announced that unlisted bonds, debentures, debt mutual funds, and market-linked debentures will be taxed on capital gains according to the prevailing rates, irrespective of the holding period.