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Mutual Fund Tax & Equity Tax – LTCG, STCG, STT – FY 2024-25

Shitanshu Kapadia
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Mutual Fund Tax & Equity Tax – LTCG, STCG, STT – FY 2024-25

Mutual Fund Tax and Equity Tax Rules are changed in Budget 2024. Now investors and traders both need to pay higher taxes on profit earned from the stock market. In Budget 2024, the rationalization of capital gain tax is announced. Changes in LTCG and STCG both are done for FY 2024-25.

Now short-term gains (STCG) of financial assets attract a 20% tax rate. Long-term gains (LTCG) on all financial and non-financial assets to attract a tax rate of 12.5%. STT (Security Transaction Tax) is changed. The rate of STT on the sale of options in securities has increased from 0.0625% to 0.1%. The tax on futures transactions also increased from 0.0125% to 0.02% of the traded price.   

The change in Mutual Fund Tax (LTCG, STCG) and Equity Tax (LTCG, STCG, STT) is complicated as per the type of the asset, listed, unlisted, and holding period. Let’s try to demystify and understand its impact on investors and traders.

Mutual Fund Tax – LTCG, STCG FY 2024-25

Types of Mutual Funds

After Budget 2024, there are 3 Types of Mutual Funds for Tax Purposes.

#1 Equity Mutual Funds

Equity Mutual Funds hold over 65% of Indian stocks in their portfolio. Furthermore, for a Fund Of Fund (FOF), the requirement is to allocate 90% of its assets to funds that also allocate 90% of its assets to domestic equity investments (such as Equity ETFs).

#2 Fixed Income – Debt Mutual Funds

Debt Mutual Fund hold over 65% of its portfolio in Bonds or Money Market instruments. Yet, in order to qualify for a Debt Mutual Fund, the Fund of Fund must invest at least 65% of its assets in funds that in turn invest at least 65% of their assets in debt and money market instruments.

#3 Other Mutual Funds

If any fund does not fall under the above two categories it is categorized as other mutual funds such as Overseas FOFs, Bonds, etc.

Holding Period

Along with the type of mutual funds, another important factor that decides tax on the mutual fund is the holding period.

#1 Equity Mutual Funds

The holding period of equity mutual funds decides the type of tax – short-term capital gain tax or long-term capital gain tax. If the mutual fund holding period is 12 months or less then the mutual fund gain is subject to short-term capital gain tax (STCG).

If the mutual fund holding period is more than 12 months the mutual fund gain is subject to long-term capital gain tax (LTCG).

To find out the holding period is very easy in case you have made a lump sum investment in the mutual funds. However, in case you have selected the SIP route, you need to understand that for mutual fund SIP, each SIP is treated as a separate investment to find out the holding period and applicable taxes. When you redeem a mutual fund it will be first in first out while determining the holding period and tax on the mutual fund.

#2 Fixed Income – Debt Mutual Funds

After Budget 2024, the holding period for debt mutual funds to be considered a long-term asset has been decreased from 36 months to 24 months. On debt mutual funds LTCG or STCG is not applicable they are taxed as per tax slab rates applicable to the investor.

#3 Other Mutual Funds

If you hold other mutual funds for less than two years or 24 months, it will be classified as Short Term Capital Gain (STCG); if held for more than two years or 24 months, it will be considered Long Term Capital Gain (LTCG).

LTCG STCG Equity Debt Mutual Funds FY 2024

Equity Tax – LTCG, STCG, STT – FY 2024-25

STCG – Short-Term Capital Gain tax is applicable on the profit of the listed equity if sold before 12 months. The earlier tax rate was 15% in the budget 2024 it is increased to 20%.

LTCG – Long-Term Capital Gain Tax is applicable on the profit of the listed equity if sold after 12 months. The tax rate would be 12.5%. Earlier that tax rate was 10%.

The LTCG exemption limit of 1 lakh on these assets has also increased to 1.25 lakh Rs. This increased exemption limit will apply for FY 2024-25 and subsequent years.

STT – Security Transaction Tax in the Futures & Options segment is modified. STT on the sale of an option in securities has been hiked from 0.0625% to 0.1% of the option premium.

STT on the sale of futures in securities from 0.0125% to 0.02% of the price at which such futures are traded.

Security Transaction Tax Equity - STT FY 2024-25

FAQs

What is the date by which the new taxation provisions are applicable?

The new provisions for the taxation of capital gains come into force on 23 July 2024 and shall apply to any transfer made on or after 23 July 2024.

What simplifications have been made to the holding period?

Before, there used to be three timeframes to determine if an asset qualifies as a long-term capital asset. The holding period is now more straightforward. Listed securities have a holding period of one year, while all other assets require a holding period of two years.

What are the major changes in LTCG and STCG?

The rate for short-term capital gain paid on listed equity and equity-oriented mutual funds has been raised from 15 to 20%. Likewise, the long-term capital gain rate for these assets has seen a rise from 10 to 12.5%.

Is there any change in the exemption limit for long-term capital gains?

Yes, The threshold for LTCG exemption on these assets has been raised to 1.25 lakh Rs from 1 lakh. The enhanced exemption threshold will be in effect for the fiscal year 2024-25 and onwards.

Capital Gain Tax on Sale of Property – Indexation Benefit Removed

Shitanshu Kapadia
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Capital Gain Tax on Sale of Property – Indexation Benefit Removed

The rule of Capital Gain Tax calculation on the sale of property is modified in the Budget 2024. The indexation benefit is now removed. Before the Budget 2024, the long-term capital gain from the property sale was taxed at 20% with indexation benefits. Now as per the budget indexation benefit is removed and the tax rate is reduced to 12.5%. This leads to increased tax liability for individuals planning to sell their property. Let’s try to understand this in detail along with examples.

capital gain tax real estate budget 2024

LTCG on Sale of Property – Indexation Benefit Removed

The new rule of removing the indexation benefit increases tax liability to the property seller.

Let us say you purchased the property for ₹50 lakhs a few years back. Now, you need money and you have a buyer. You sell the property at a rate of ₹60 lakhs. The actual profit in this case would be ₹10 lakhs. Now under the old provision, the seller was able to take benefit of the Cost Inflation index while adjusting the purchase price and paying a tax. The CII (Cost Inflation Index) is declared by the Income tax department.

Now, with the new rule, taxpayers need not adjust the purchase price based on CII. The actual purchase and sale prices need to be considered while calculating tax liabilities.

Old Long-Term Capital Gain Tax Provision on Property

Purchase Price of Property – ₹50 lakhs

CII Adusted Purchase Price – ₹64.8 lakhs

Sale Price of Property (2024-25) – ₹75 lakhs

Profit – ₹10.2 lakhs

Tax liability under old LTCG Rule (20%) – ₹2.04 lakhs

New Long Term Capital Gain Tax Provision on Property

Purchase Price of Property – ₹50 lakhs

Sale Price of Property (2024-25) – ₹75 lakhs

Profit – ₹ 25 lakhs

Tax liability under the new LTCG Rule (12.5%) – ₹ 3.125 lakh

From the above example, it is clear that although the tax rate is reduced to 12.5% as the indexation benefit is removed tax liability of the taxpayer is increased. The new rule applies to all unlisted assets like real estate, gold, silver, etc.

LTCG Real Estate and other unlisted financial assets

The new rule is applicable only on the property purchased after the year 2001. The indexation benefits for properties bought till 2001 will continue. This means if the property is purchased before 2001 you can get indexation benefit on that property. If such property is sold capital gain tax shall be calculated after factoring in indexation based on the price in 2001 or the price at which it was bought plus indexation till 2001 whichever is lower. Property bought after 2001 will be taxed at a flat rate of 12.5%.

The long-term capital gain tax on unlisted financial assets is applicable if the holding period is above 2 years. Short-term capital gain tax is applicable if the holding period is less than 2 years. There is no change in rollover benefits that are available under the I-T Act. So, the taxpayers who want to save on LTCG tax with low rates can continue to avail of the rollover benefits after fulfilling the conditions.

 

FAQs

What is the LTCG Rate on Property?

The LTCG tax rate on property sales is reduced from 20% to 12.5%. The new applicable LTCG Rate on Property is 12.5%. The indexation benefit of the purchase price is removed.

How can I avoid LTCG on the Sale of Property?

Section 54 exempts you from paying LTCG tax on the sale of property if you acquire a new house either one year before or within two years of selling your old property.

How to calculate capital gain tax on Property?

The calculation of Capital Gain Tax is simple –

(Sale Price – Purchase Price) x Applicable Tax Rate

What is a period of Holding for LTCG?

For property, gold, silver, and any other unlisted assets the holding period is 2 years for LTCG. In case the asset is sold before 2 years short-term capital gain tax is applicable.

Latest Income Tax Slab and Rates – 5 Key Changes Budget 2024-25

Shitanshu Kapadia
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Latest Income Tax Slab and Rates – 5 Key Changes Budget 2024-25

Budget 2024-25 is released. Tax Slab in New Tax Regime is revised making it more lucrative for the taxpayers. Additionally, the standard deduction amount is increased to ₹ 75,000 from ₹ 50,000. Nirmala Sitharaman, the union finance minister, and her team have done a very good job and tried to make the common man happy. In the budget speech, 5 key income tax and direct tax changes are announced. These changes will directly affect the common man. Let’s take a look at 5 Key Changes Budget 2024-25.

Income Tax Slab Budget 2024

Income Tax Slab and Direct Taxes – 5 Key Changes

#1 Income Tax Slab – New Tax Regime

The income Tax Slab for the new tax regime is simplified. As per the proposal, a 5 percent tax will be levied on income between ₹3-7 lakh, 10 percent between ₹7-10 lakh, 15 percent for ₹10-12 lakh. However, a 20 percent tax will continue to be levied on income between ₹12-15 lakh and 30 percent for income above ₹15 lakh. Earlier 5 percent tax was applicable on income up to ₹6 lakh. The new tax slab

New income tax regime tax slabs are:

Up to ₹ 3 lakh the tax is NIL

From ₹ 3 lakh to ₹ 7 lakh the tax rate is 5%

From ₹ 7 lakh to ₹ 10 lakh the tax rate is 10%

From ₹ 10 lakh to ₹ 12 lakh the tax rate is 15%

From ₹ 12 lakh to ₹ 15 lakh the tax rate is 20%

For above ₹ 15 lakh income the tax rate is 30%

The above rate rationalization leads to savings of ₹ 10000 for the highest tax bracket taxpayers.

#2 Standard Deduction

Standard Deduction for salaried employees increased from ₹50,000 to ₹75,000. The increase in the standard deduction of ₹25,000 leads to further tax savings of ₹7,500 for the highest tax bracket taxpayers. So, the total tax benefit of ₹ 17,500.

Further to the above, the standard deduction limit for family pensioners has been increased to Rs 25,000 from Rs 15,000. An increase in the standard deduction would mean more tax savings for salaried individuals and pensioners.

#3 Short-Term Capital Gain Tax

Short-Term Capital Gain (STCG) tax is applicable on selling equity investment before 12 months (1 Year). Short-Term Capital Gain Tax is increased to 20% from the current 15% rate. The other financial assets and non-financial assets shall continue to attract the applicable tax rate. The hike of 5% is likely to affect money inflow in the stock market slightly. This rise applies to the sale of all listed equity shares, equity-oriented mutual funds, and business trusts.

tax changes budget 2024

#4 Long-Term Capital Gain Tax

Any listed financial instruments held beyond 12 months (1 year) shall be considered as long-term. Long-Term Capital Gain Tax (LTCG) is revised. The revised LTCG rate is 12.5%. The earlier LTCG rate was 10%. This means any gains from stocks (equity) or equity-oriented mutual funds for a holding period above 1 year and above would be charged at 12.5%.

Long-term capital gains on all other long-term capital assets (section 112) have been reduced from 20 percent to 12.5 percent but indexation has been removed.

#5 Capital Gain Yearly Exemption Limit

Earlier Capital Gains up to ₹ 1 lakh per year were exempted from capital gain tax. Now, this limit is revised. As per Budget 2024-25, the limit for exemption on capital gains from certain financial assets has been increased to ₹1.25 lakh per year.

Can You Really Buy Time? Effective Time Management Strategies for Entrepreneurs

Shitanshu Kapadia
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Can You Really Buy Time? Effective Time Management Strategies for Entrepreneurs

Time is more than just a resource in business—it’s the currency of success. How you spend your time can be a bigger determinant of your business’s success than how you spend your money. Effective time management is therefore not just a good skill to have; it’s a core component of entrepreneurial excellence. Here, we look at practical time management tips tailored specifically for entrepreneurs. These strategies are designed to maximize productivity without sacrificing creativity and drive, making sure every minute counts.

time management

Prioritize Ruthlessly 

Prioritization is the first step for the best time management for entrepreneurs. Not all tasks are the same, and recognizing which tasks have the most impact on your business is crucial. Start your day by choosing and committing to doing the top three tasks that will contribute most significantly to your goals. This approach keeps your daily agenda from being hijacked by tasks that are urgent but not necessarily important. Make it a practice to understand the difference between urgency and importance, and let this understanding guide your daily task list.

Attract Success by Staying Focused 

Staying focused on your goals requires a mix of tactics and one of them is to use the law of attraction to keep your mind aligned with your objectives. The law of attraction is a principle that suggests that positive or negative thoughts bring positive or negative experiences into a person’s life.

For entrepreneurs, maintaining a positive mindset and focusing intensely on your goals can attract the resources, people, and opportunities necessary to achieve them. This doesn’t mean ignoring the realities of entrepreneurship; rather, it involves a conscious decision to remain optimistic and proactive about the future, thereby organizing your time around your most ambitious achievements.

Saving Time by Outsourcing Non-Core Functions 

One of the most impactful strategies for effective time management is outsourcing non-core functions such as accounting. Outsourced accounting can not only reduce the burden of handling complex financial details but also free up valuable time for different entrepreneurs to focus on core business activities. Investing in professional accounting services ensures that your financial records are precise, compliant, and prepared on time, which in turn supports better decision making.

More importantly, it eliminates the need to stay updated yourself with the ever-changing tax laws and financial regulations, saving you hours that can be better spent on strategic planning or scaling your business. This approach not only optimizes time management but also enhances your business’s capacity to grow without being bogged down by administrative tasks.

Leverage Technology for Efficient Workflow 

Businesses cannot overlook the significance of technology in managing time effectively. Entrepreneurs can harness a variety of tools and apps designed to streamline business processes. From project management software like Asana or Trello to time-tracking tools such as Toggle or Harvest, technology can automate mundane tasks, keep you on track, and reduce the time spent on project management.

These tools provide real-time insights into your business operations, allowing you to make swift decisions and adjust your strategies without delay. Moreover, integrating these tools into your daily operations can significantly decrease the time spent on communication and help in setting clear tasks and deadlines for your team.

Delegate to Empower 

Delegation is not just about shifting responsibilities; it’s about empowering your team. For many entrepreneurs, letting go of certain controls can be difficult but it’s essential for effective time management. By delegating tasks to qualified team members, you not only free up your time but also enhance your team’s skills and confidence.

This strategy requires trust and clear communication but, when done correctly, it leads to a more productive and motivated workforce. Make sure to delegate tasks wisely, provide the necessary resources and authority to complete those tasks, and resist the urge to micromanage. This will help you focus more on high-impact activities that require your unique expertise.

Regular Reviews and Adjustments 

The business landscape is continuously evolving, and so should your time management strategies. Regular reviews of how you and your team are spending time can lead to significant improvements in efficiency. Set aside time each month to review completed tasks, assess time allocation, and determine the effectiveness of your current time management strategies.

This review allows you to identify time-wasting activities and adjust your plans accordingly. It’s also an opportunity to celebrate achievements and reflect on lessons learned, which can motivate you and your team to maintain high productivity levels.

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