Capital Gains Tax After July 2024 Budget
The Union Budget 2024 significantly changed capital gains taxation in India. STCG on equity was raised from 15% to 20%, and LTCG was raised from 10% to 12.5%. The LTCG exemption was increased from ₹1 lakh to ₹1.25 lakh per FY. Importantly, indexation benefit was removed for all asset classes.
For equity investors, this means higher tax on gains but a slightly higher exemption. The net impact depends on your holding period and gain amount.
Tax Harvesting Strategy
Tax harvesting involves selling equity investments to book LTCG up to ₹1.25 lakh each year (tax-free) and immediately reinvesting. This resets your cost basis and reduces future tax liability.
For example, if you have ₹5 lakh unrealized LTCG, you can sell ₹1.25L worth each year over 4 years and pay zero tax. Without harvesting, selling all at once would result in tax on ₹3.75 lakh (₹5L − ₹1.25L exemption).