The long-term capital gains tax (LTCG) on all financial and non-financial assets has been increased from the existing 10% to 12.5% by the Union Budget 2024. However, certain assets now levy a 20% short-term capital gains tax (STCG).

Additionally, it should be noted that the Rs 1.25 lakh exemption threshold for long-term capital gains tax has been raised from Rs 1 lakh. This implies that even if the LTCG tax rate has gone up from 10% to 12.5%, you may be able to save money on capital gains taxes.

Long-term capital gains (LTCG) were free up to Rs 1,00,000 under the current regulations, while the tax on income beyond Rs 2,00,000 was Rs 10,400 (including a 4% cess, but excluding surcharge).

The exemption limit has been raised from Rs 1,00,000 to Rs 1,25,000 with the new modification. As a result, the tax on a gain of Rs 2,00,000 is now Rs 9,375 (tax plus 4% cess, surcharge excluded). Taxpayers save a net of Rs 650 as a result of this, according to Divya Baweja, Partner at Deloitte India. The amount of your capital gains will determine how it affects your taxes. The increased exemption level means that even with the rate rise, you might be able to save a little money.

"The rate of long-term capital gains derived from transfer of capital assets (such as listed equity shares subject to STT, units of equity-oriented fund and business Trust) has been proposed to be revised from 10% to 12.5% vide 2024 Budget announcements," stated CA (Dr.) Suresh Surana, echoing similar opinions. In addition, it has been suggested that, under section 112A, the relevant exemption level for long-term capital gains be raised from Rs 1 lakh to Rs 1.25 lakh. According to the proposed revisions, a taxpayer would pay an additional Rs 625 in tax if they had a long-term gain of Rs 200,000."

For investors who stay onto their investments for more than a year, the shift is a positive one. The upper limit of the LTCG tax exemption has been raised by the government. This implies that you will retain a larger portion of your hard-earned profits before paying taxes.

"The recent increase in the long-term capital gains (LTCG) tax rate from 10% to 12.5% and the modification of the short-term capital gains (STCG) taxation to 20% for specific financial assets is concerning," stated Krishan Mishra, CEO of FPSB India. Nevertheless, despite the minor drawback of the higher rates, investing a year ahead of schedule is a significant step toward promoting long-term investments."