Detailed Analysis: Capital Gains on Sale of Shares
Under New Income Tax Act (Updated 2024)
Prepared by Shantanu Bahegavankar
The Finance (No. 2) Act, 2024 brought transformative changes to capital gains taxation on shares,
effective July 23, 2024. This comprehensive analysis covers the major modifications and their practical
implications for investors and tax practitioners.
Key Changes Overview
Tax Rate Increases: Short-term capital gains tax on listed equity shares jumped from 15% to 20%, while
long-term capital gains tax increased from 10% to 12.5%. The exemption limit for LTCG was enhanced
from ₹1 lakh to ₹1.25 lakh annually.
Simplified Holding Periods: The framework now uses only two holding periods - 12 months for listed
securities and 24 months for other assets, streamlining the previous three-tier structure. Listed units of
business trusts benefit from reduced holding periods (36 months to 12 months), while unlisted shares see
a reduction from 36 to 24 months.
Uniform Tax Structure: A standardized 12.5% LTCG rate applies across all asset classes, removing
indexation benefits for most assets except a special option for land and buildings acquired before July 23,
2024.
Computational Framework
Listed Equity Shares Example
For shares held over 12 months and sold after July 23, 2024:
Sale proceeds: ₹8,00,000
Cost of acquisition: ₹5,00,000
Long-term capital gains: ₹3,00,000
Taxable gains: ₹3,00,000 - ₹1,25,000 = ₹1,75,000
Tax liability: ₹1,75,000 × 12.5% = ₹21,875
Under New Income Tax Act (Updated 2024)
Prepared by Shantanu Bahegavankar
The Finance (No. 2) Act, 2024 brought transformative changes to capital gains taxation on shares,
effective July 23, 2024. This comprehensive analysis covers the major modifications and their practical
implications for investors and tax practitioners.
Key Changes Overview
Tax Rate Increases: Short-term capital gains tax on listed equity shares jumped from 15% to 20%, while
long-term capital gains tax increased from 10% to 12.5%. The exemption limit for LTCG was enhanced
from ₹1 lakh to ₹1.25 lakh annually.
Simplified Holding Periods: The framework now uses only two holding periods - 12 months for listed
securities and 24 months for other assets, streamlining the previous three-tier structure. Listed units of
business trusts benefit from reduced holding periods (36 months to 12 months), while unlisted shares see
a reduction from 36 to 24 months.
Uniform Tax Structure: A standardized 12.5% LTCG rate applies across all asset classes, removing
indexation benefits for most assets except a special option for land and buildings acquired before July 23,
2024.
Computational Framework
Listed Equity Shares Example
For shares held over 12 months and sold after July 23, 2024:
Sale proceeds: ₹8,00,000
Cost of acquisition: ₹5,00,000
Long-term capital gains: ₹3,00,000
Taxable gains: ₹3,00,000 - ₹1,25,000 = ₹1,75,000
Tax liability: ₹1,75,000 × 12.5% = ₹21,875
