If you sold any property or asset like a house, plot of land, or even shares during the financial year 2024–25, there’s one date you need to keep in mind while filing your Income Tax Return (ITR) in 2025—July 23, 2024. This isn’t just another date on your calendar; it marks a key turning point for capital gains taxation in India.
From July 23, 2024, a new taxation structure for capital gains kicks in, & it could significantly impact how much tax you pay on the sale of your assets. Depending on when you sell your property or asset, you might find yourself taxed under either the old or the new rules. Let’s dive into what that means & how it affects you.
- Capital Gains Tax: What’s Changed?
Before July 23, 2024, long-term capital gains (LTCG) on assets like property or shares were subject to different tax rates based on the asset’s holding period. The introduction of new rules simplifies this process, impacting both short-term & long-term capital gains tax."
- The July 23 Cut-Off
If you sell a property before July 23, 2024, the old tax regime applies. Under the previous rules, if you sold a property after holding it for over two years, you’d benefit from indexation—a method where the cost of the property is adjusted for inflation, lowering your taxable gain. The long-term capital gains from this sale would have been taxed at 20% with indexation."
However, if you sell your property after July 23, 2024, you’ll be subject to a flat 12.5% tax rate on your gains, but without the benefit of indexation. While this rate is lower than the 20% tax, the lack of indexation might result in a higher taxable gain for assets you’ve owned for a long time.
To help ease the transition, the government has provided an option for those who purchased property before July 23 but sold it afterwards. You can choose whether to pay the 12.5% tax without indexation or opt for the 20% tax with indexation, depending on which works out to be more beneficial in your case.
- Taxation for NRIs
For Non-Resident Indians (NRIs), long-term capital gains from the sale of a house will be taxed at the flat 12.5%, irrespective of when the property was bought. This means that NRIs don’t have the option of opting for the older tax structure with indexation. Additionally, the taxation on short-term capital gains (STCG) from the sale of listed securities remains based on applicable income tax slabs."
- Capital Gains Tax for Shares and Equity Mutual Funds
The tax treatment for shares & equity mutual funds also changed. If you sold these assets before July 23, 2024, your long-term capital gains (for assets held for over one year) would be taxed at 10% beyond the Rs 1 lakh exemption. However, for sales made on or after July 23, the rate increases to 12.5%, with the exemption limit also raised to Rs 1.25 lakh.
Short-term capital gains on listed equities were previously taxed at 15%, but now, for transactions post-July 23, the tax rate increases to 20%. This could mean a higher tax burden if you sell equities after the new rules take effect.
- Gold & Other Capital Assets
The tax rate on gold has also been updated. Previously, gold had a 3-year holding period to qualify for long-term capital gains. Under the new rules, the holding period is reduced to just 2 years. Gold will now be taxed at 12.5% for assets held for more than two years but sold on or after July 23, 2024.
This change isn’t just for real estate or shares. It applies across various types of capital assets, including land, property, & even gold, meaning the timing of your sale could impact your tax liability significantly."
- The Role of Cess and Surcharge
Remember, the capital gains tax is subject to additional charges like the 4% health & education cess and any applicable surcharge, which may further influence your total tax liability.
- Why This Date Matters for You
It’s not just the type of asset you sell that matters anymore; it’s the when. The July 23, 2024, cut-off plays a pivotal role in determining which tax structure applies to your transaction. This means the timing of your sale—whether you sell before or after July 23—could directly impact your tax savings or liabilities.
So, when you file your ITR for FY 2024–25 in 2025, make sure you check the sale date of your asset carefully. If you sold it before July 23, 2024, you might be able to choose between the old & new tax structures. If you sold it on or after that date, you’ll need to adhere to the new tax rules.
Conclusion: Mark Your Calendar!
Keep a close eye on July 23, 2024. This date could be the deciding factor in your capital gains tax calculations when you file your ITR for FY 2024–25. While the changes in the tax rules might seem subtle, they have a significant impact on your tax liabilities. Plan accordingly & make sure to consult a tax expert if you’re unsure how the new rules will affect your situation.
So, remember to circle July 23, 2024, on your calendar—because it could determine whether you end up with a smaller tax bill or a bigger one.
