For the benefit of all investors, the capital gains regime should be rationalized and standardized. The capital gains tax rates and periods associated with various assets—such as debt, stock, real estate, and so forth—determine whether your gains are short-term or long-term.
An investor group hopes that the budget will further simplify capital gains taxes as it prepares to be presented in Parliament on February 1.
Equity Investment
Short-term capital gains (STCG) tax is levied at a rate of fifteen percent on the sale of listed securities, which include equity shares and units of equity-oriented mutual funds (where equity exposure exceeds sixty-five percent of the assets), before the year ends.
If the Securities Transaction Tax (STT) is paid at the moment that such securities are transferred, then this concessional tax rate is applicable.
When units of equity-oriented funds or listed equity shares are sold after a year, the long-term capital gains (LTCG) tax becomes applicable. Any gains over Rs 1 lakh in a year are subject to a 10% tax.
Debt Investment
The government chose to tax capital gains from debt mutual funds and some other types of non-equity mutual funds at a higher rate in the Finance Act 2023, which is a major setback for investors in mutual funds.
The Finance Bill was amended on March 24, 2023, stating that gains from funds that have less than 35 percent of their assets in stocks are not eligible for indexation and LTCG advantages. These units are included in your income and subject to income-taxation at the time of sale.
The regulations are a little bit different for SGB. If you hold SGBs until they mature, which is in eight years, they are free from taxes. If you sell them before their time, you have to pay capital gains tax.
Real Estate
When it comes to residential real estate, the profits from the sale will be treated as STCG if the whole holding term at the time of sale is less than 24 months. On the other side, profits are categorized as LTCG if the holding duration is longer than 24 months.
Any profits made from real estate deals are liable to taxes. Real estate STCG is taxed at the relevant slab rates and applied to your other income. Conversely, LTCG is subject to a 20 percent indexation tax rate, exclusive of surcharge and cess.
