Capital Gains Tax Planning

Finance Act 2024: LTCG on listed equity (held >12 months) — rate increased from 10% to 12.5%; the ₹1 lakh exemption threshold increased to ₹1.25 lakh. STCG on listed equity (held ≤12 months) — rate increased from 15% to 20%. These rates apply to sales on or after 23 July 2024. For pre-23 July sales in AY 2025-26, the old rates apply.

Finance Act 2024 removed indexation for real estate sold on or after 23 July 2024 — the new flat rate is 12.5% LTCG without indexation. An opt-in relief is available for properties acquired before 23 July 2024: taxpayers can choose between (a) 12.5% without indexation or (b) 20% with indexation — whichever gives a lower tax liability. This election is per-property and per-year.

Section 54F: LTCG from any long-term capital asset (other than residential house property) is fully exempt if the entire net consideration (not just the gain) is invested in one residential house property in India within 1 year before or 2 years after the sale (or 3 years if under construction). Partial investment: exemption proportional to consideration reinvested. Condition: the taxpayer must not own more than one other residential house on the date of transfer.

Unlisted shares held for more than 24 months are long-term. Rate: 12.5% (effective 23 July 2024) without indexation. Cost basis: actual cost of acquisition. If shares were received as gift, inherited, or via ESOP exercise, the cost is the original cost of the previous holder (Section 49). For ESOPs: the perquisite value at exercise is the cost basis for capital gains — no further taxable income on gains within the ESOP price, only on gains above the FMV at exercise date.

Section 54EC: LTCG from land or building is exempt if invested in specified bonds (NHAI, REC — currently only REC 54EC bonds are available) within 6 months of sale. Maximum: ₹50 lakh per financial year. Lock-in: 5 years. Interest: 5% taxable. The bonds do not provide Section 80C deduction. Suitable for HNIs who miss the 1-year window for Section 54F residential reinvestment or who prefer a fixed income over reinvesting in real estate.