Understanding Capital Gains Tax After Budget 2024

Budget 2024 changed STCG to 20% and LTCG to 12.5%. Here is what changed, who is affected, and how to restructure your portfolio.

1.What changed in Budget 2024

Before Budget 2024: equity STCG = 15%, LTCG = 10% above ₹1 lakh. After: **equity STCG = 20%** (up from 15%), **LTCG = 12.5%** (up from 10%) above **₹1.25 lakh** (up from ₹1 lakh). Real estate LTCG: 12.5% without indexation (new option) vs 20% with indexation (grandfathered for pre-July 2024 purchases). Debt funds: no change (still taxed at slab rate post-April 2023).

2.Impact on equity investors

STCG increase (15% → 20%): a trader with ₹5 lakh short-term gains now pays ₹1 lakh (was ₹75,000). An extra ₹25,000 in tax. LTCG increase (10% → 12.5%): offset by higher exemption (₹1L → ₹1.25L). For someone with ₹5 lakh LTCG: old tax = (₹5L − ₹1L) × 10% = ₹40,000. New tax = (₹5L − ₹1.25L) × 12.5% = ₹46,875. **₹6,875 more tax on ₹5 lakh gains.** The impact is modest for long-term investors.

3.How to restructure your approach

For traders (STCG-heavy): the 33% tax increase (15 → 20%) makes short-term trading less profitable. Consider extending holding periods to 1+ year where possible. For investors: harvest ₹1.25 lakh LTCG annually (tax-free). For property sellers: compare 12.5% without indexation vs 20% with indexation — high-inflation periods favour the old method. For debt fund investors: no change; continue holding FDs and debt funds equivalently.

4.The grandfathering rule for equity

Equity purchased before February 1, 2018 has its cost base "grandfathered" to January 31, 2018 prices. Budget 2024 did NOT change this rule. If you hold pre-2018 equity, your cost basis is still the higher of actual purchase price or January 31, 2018 market price. This significantly reduces LTCG on very old holdings. Don't worry about the rate increase if your cost basis is already grandfathered up.

5.Key takeaway

Budget 2024 increases tax for active traders (STCG 15→20%) more than for long-term investors (LTCG 10→12.5% with higher exemption). The fundamental strategy doesn't change: hold equity for 1+ year, harvest ₹1.25 lakh LTCG annually, and avoid unnecessary short-term trading. Use our capital gains calculator to compute your exact tax under the new rates.