Capital Gains Tax Rates A.Y.2023-24 & A.Y.2024-25 (2024)

Capital Gains Tax Rates A.Y.2023-24 & A.Y.2024-25: The following information provides a comprehensive overview of the Capital Gains Tax Rates applicable to different types of assets, the holding periods for these assets, the concept of indexation, and how to calculate both long-term and short-term capital gain tax for the Assessment Years 2023-24 and 2024-25 in India.

Capital gains tax is a levy on the profit realized from the sale of a capital asset like mutual funds, shares, and property. The capital gains tax rates and the classification of the gain as short-term or long-term dependence on the type of asset and the period for which it was held.

Capital Gains Tax Rates A.Y.2023-24/A.Y.2024-25

The following table provides a detailed chart of the Capital Gains Tax Rates applicable to different types of assets for the Assessment Years 2023-24 and 2024-25 in India. Capital gains tax is levied on the profits gained from the sale of capital assets like mutual funds, shares, and property. The capital gains tax rates vary based on the type of asset and whether the gain is short-term or long-term. Short-term capital gains are usually taxed at the individual’s income tax slab rate, while long-term capital gains have specific rates. Please note that these capital gains tax rates are subject to change as per the regulations of the Indian Income Tax Act.

Changes for A.Y.2024-25:The changes in the Capital Gains Tax Rates effective from 1st April 2023 are as follows: For Debt Mutual Funds: The tax on long-term capital gains changes from “10% without indexation or 20% with indexation, whichever is lower” to being taxed as per the individual’s income tax slab rate.

Table of Capital Gains Tax Rates on Different Assets A.Y.2023-24/A.Y.2024-25

Holding Period of Different Types of AssetsA.Y.2023-24/A.Y.2024-25

The following information outlines the holding periods for different types of assets for the Assessment Years 2023-24 and 2024-25 in India. The holding period of an asset is a crucial factor in determining whether the capital gain from its sale will be classified as short-term or long-term, which in turn affects the applicable tax rate.

For mutual funds, shares, and property, the holding period varies. For instance, the holding period for short-term capital gains on debt-oriented mutual funds is 36 months, while for equity-oriented mutual funds and listed equity shares, it’s 12 months.

For unlisted equity shares, immovable property, and movable property, the short-term capital gains apply if the holding period is 24 months or less for the former two and 36 months or less for the latter.

Please note that the classification of capital gains as short-term or long-term can significantly impact the tax liability, and it’s essential to consider this while planning your investments and tax.

Table of Holding Period of Different Types of Assets A.Y.2023-24/A.Y.2024-25

What is Indexation and How to Calculate it

Indexation:Indexation is a process by which the cost of acquisition is adjusted against inflationary rise in the value of an asset. The Central Government has notified a cost inflation index for this purpose. The benefit of indexation is available only to long-term capital assets.

Factors to Consider for Computation of Indexed Cost of Acquisition

1. Year of acquisition/improvement
2. Year of transfer
3. Cost inflation index of the year of acquisition/improvement
4. Cost inflation index of the year of transfer

Formulas:The indexed cost of acquisition and improvement are computed using the following formulas:

Indexed Cost of Acquisition:Cost of acquisition × (Cost inflation index of the year of transfer / Cost inflation index of the year of acquisition)

Indexed Cost of Improvement:Cost of improvement × (Cost inflation index of the year of transfer / Cost inflation index of the year of improvement)

Again, this is not applicable for short-term capital assets.

Cost Inflation Index

The following table presents the Cost Inflation Index (CII) for various financial years from 2001-02 to 2023-24. The Cost Inflation Index is a measure used by the Income Tax Department of India to account for inflation when calculating long-term capital gains on the sale of capital assets.

The CII is a crucial factor in determining the inflation-adjusted cost of acquisition of an asset, which in turn affects the calculation of taxable capital gains. The base year for the CII is 2001-02, and the index for this year is 100.

Please note that the CII for each year is announced by the Central Government, and it’s essential to use the correct index for the year of acquisition and sale when calculating capital gains.

Cost Inflation Index Table (For Latest Updates on CII Table Visit here)

How to Calculate Long-term Capital Gain Tax (Format)

The following information provides a format on how to calculate Long-term Capital Gain Tax. This calculation is crucial for anyone who has sold a capital asset and needs to determine the taxable amount of their long-term capital gains.

The process begins with the full value of consideration, which is the sale price of the asset. From this, any expenditure incurred during the transfer of the capital asset, such as brokerage fees, commission, or advertisem*nt expenses, is subtracted. This gives the net sale consideration.

Next, the indexed cost of acquisition and any indexed cost of improvement is subtracted from the net sale consideration. The result of these calculations is the long-term capital gain, which is the amount subject to tax.

Please note that the indexed cost of acquisition and improvement is calculated using the Cost Inflation Index (CII) to adjust for the effects of inflation during the holding period of the asset. You can check the cost inflation index table above to calculate the indexed cost of acquisition.

How to Calculate Short-term Capital Gain Tax (Format)

The following information provides a format for calculating Short-term Capital Gain Tax. This is an essential calculation for individuals who have sold a capital asset within a short holding period and need to determine the taxable amount of their short-term capital gains.

The calculation begins with the full value of consideration, which is the sale price of the asset. From this, any expenditure incurred during the transfer of the capital asset, such as brokerage fees, commission, or advertisem*nt expenses, is subtracted. This gives the net sale consideration.

Next, the cost of acquisition (which is the purchase price of the capital asset) and any cost of improvement are subtracted from the net sale consideration. The result of these calculations is the short-term capital gain, which is the amount subject to tax.

Please note that, unlike long-term capital gains, short-term capital gains do not benefit from indexation, which adjusts the cost of acquisition and improvement for inflation. Therefore, the actual costs at the time of acquisition and improvement are used in these calculations.

Example:

Suppose you bought a piece of artwork for Rs. 50,000 and sold it within a year for Rs. 80,000. You also incurred Rs. 2,000 in expenses for advertising and brokerage during the sale. Here’s how you would calculate the short-term capital gain:

So, your short-term capital gain from the sale of the artwork would be Rs. 28,000. This amount would be subject to tax as per the applicable short-term capital gains tax rate.

Calculation of Capital Gain Tax Rate:For short-term capital gains on movable property, such as artwork in the example provided, the tax is typically applied as per the individual’s income tax slab rate. This means that the tax rate will depend on the total taxable income of the individual, including the short-term capital gain.

So, if the short-term capital gain was Rs. 28,000, this amount would be added to your other income for the year, and the tax would be calculated based on the tax slab rate that applies to your total income.