Capital Gains Tax After Budget 2024: What Changed and How to Plan
By Nitish Bharadwaj · Published May 18, 2026 · 6 min
Budget 2024 increased the long-term capital gains tax on equity from 10% to 12.5% and raised the STCG rate from 15% to 20%, while also indexing the grandfathering date. Debt fund gains are now taxed at income slab rates regardless of holding period. This article explains the exact rate changes, their effective date, the impact on equity SIPs and debt mutual funds, and the portfolio restructuring strategies that minimise tax liability under the new rules.
Budget 2024 delivered the biggest overhaul of capital gains tax in India in a decade. Budget 2025 confirmed all these rates carry forward unchanged into FY 2026-27. If you hold mutual funds, stocks, property, or gold, here is the current framework — including how to calculate your actual tax — and the planning strategies that reduce your bill legally.
What Changed in Budget 2024
| Asset | Short Term (STCG) | Long Term (LTCG) | Holding Period for LTCG |
|---|---|---|---|
| Listed Equity/Equity MF | 20% (was 15%) | 12.5% (was 10%), exempt up to ₹1.25L | > 1 year |
| Debt Mutual Funds | Slab rate | Slab rate (no change) | Any period |
| Property | Slab rate | 12.5% without indexation (or 20% with) | > 2 years |
| Gold/Gold ETF | Slab rate | 12.5% (was 20% with indexation) | > 2 years |
Tax Harvesting: How to Legally Reduce LTCG Tax
Every March 31, you can book ₹1.25L of long-term capital gains from equity funds tax-free. Sell and immediately reinvest (switch from same fund to a different AMC's equivalent) — this resets your cost basis. Over 20 years, this annual harvest can save ₹2–5L in cumulative tax for a large portfolio. For the complete fund-by-fund tax treatment — equity, debt, hybrid, and arbitrage — see our capital gains tax on mutual funds guide.
What to Do Now
- Equity investors: nothing changes dramatically; LTCG rate rose from 10% to 12.5%, still very favorable. Note: Section 87A rebate doesn't apply to capital gains — even if your total income is below ₹12 lakh, STCG and LTCG are taxed separately at 20% and 12.5% respectively.
- Debt MF investors: continue to be taxed at slab rate — consider tax-efficient alternatives like direct stocks or equity savings funds
- Property sellers: if you bought before 2001, ask your CA to calculate both options (with/without indexation)
- Gold investors: LTCG now at 12.5% — better than before (was 20% with indexation)
Budget 2025: All Rates Confirmed Unchanged for FY 2026-27
Budget 2025 (February 2025) made no changes to the capital gains structure set in Budget 2024. The 12.5% LTCG rate on equity, the 20% STCG rate, and the removal of property indexation all remain in effect. The headline Budget 2025 change — raising the income tax zero-threshold to ₹12 lakh under the new regime — does not apply to capital gains. STCG and LTCG are taxed at flat rates on top of your other income regardless of whether your salary is below ₹12 lakh. This is the source of a common filing error in ITR for FY 2025-26.
How to Calculate Your LTCG: A Worked Example
You invested ₹5 lakh in an equity mutual fund in April 2023 and redeemed ₹8 lakh in April 2025 — held over 1 year, so it is LTCG. Capital gain = ₹3 lakh. Subtract the ₹1.25L annual exemption — taxable LTCG = ₹1.75 lakh. Tax at 12.5% = ₹21,875. Add 4% health and education cess = ₹875. Total tax payable: ₹22,750. For the complete fund-by-fund breakdown across equity, debt, hybrid, and international funds, see our capital gains tax on mutual funds guide.
Frequently Asked Questions
What is the new STCG tax rate on equity mutual funds?
After Budget 2024, Short-Term Capital Gains (STCG) on listed equity and equity mutual funds is 20% (increased from 15%). This applies to units held for less than 1 year. The tax is flat regardless of your income slab.
How does tax harvesting work for equity funds?
Tax harvesting means booking up to ₹1.25 lakh of Long-Term Capital Gains each year tax-free before March 31, then reinvesting immediately. This resets your cost basis, so future gains are calculated from the higher price. Over 20 years, this annual action can save ₹2–5 lakh in tax for a large equity portfolio.
Did Budget 2024 remove indexation for property sales?
Yes, for properties sold after July 23, 2024, the government removed the indexation benefit and set the LTCG rate at 12.5% without indexation. However, properties bought before 2001 may still use the fair market value of 2001 as cost basis. If you bought property before 2001 or held for very long, compare both calculations with a CA.
What is the LTCG tax on debt mutual funds?
Debt mutual funds are taxed at your income slab rate regardless of how long you hold them — no LTCG benefit. This change was made in 2023 and remains in Budget 2024. If you are in the 30% bracket, a debt fund is effectively taxed at 30%, making alternatives like FDs or direct bonds more comparable on a post-tax basis.
Does the ₹12 lakh zero-tax limit under the new regime apply to capital gains?
No. The ₹12 lakh income exemption (introduced in Budget 2025) applies only to regular income such as salary and business income. Capital gains — both STCG at 20% and LTCG at 12.5% — are computed separately and taxed at flat rates even if your other income is below ₹12 lakh. This is one of the most common misconceptions in ITR filing for FY 2025-26.
What is the grandfathering rule for equity held before January 31, 2018?
When LTCG on equity was reintroduced in Budget 2018, a grandfathering provision protected gains accrued before January 31, 2018. The cost of acquisition is deemed to be the higher of the actual purchase price or the fair market value as on January 31, 2018 — so gains up to that date are effectively tax-free. Budget 2024 did not change this rule. It still applies to equity shares and equity mutual fund units bought before that date.