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Ramesh Sharma
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Asked: 2024-12-30T20:40:39+05:30 In:

How much tax is applicable on sale of equity shares?

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How much tax is applicable on sale of equity shares?
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    1. Enlightened

      The Union Budget 2025 has introduced key modifications to the taxation of equity shares and equity-oriented mutual funds. The following table summarizes the before and after impact of the changes: Comparison of Capital Gains Taxation Before and After Budget 2025 Type Earlier After Budget 2025 Short-Read more

      The Union Budget 2025 has introduced key modifications to the taxation of equity shares and equity-oriented mutual funds. The following table summarizes the before and after impact of the changes:

      Comparison of Capital Gains Taxation Before and After Budget 2025

      Type Earlier After Budget 2025
      Short-Term Capital Gains (STCG) – Holding Period ≤ 12 Months ·       Listed Shares (STT Paid): Taxed at 15% under Section 111A.

      ·       Unlisted Shares: Taxed as per the individual’s income tax slab rate.

      		 No Change
      Long-Term Capital Gains (LTCG) – Holding Period > 12 Months ·         Listed Shares (STT Paid):
      – Gains up to ₹1 lakh per financial year are tax-free under Section 112A.
      – Gains exceeding ₹1 lakh are taxed at 10% (without indexation).

      ·         Unlisted Shares:
      – Taxed at 20% with indexation benefit under Section 112.

      ·          For non-residents, LTCG on unlisted shares is taxed at 10% (without indexation).

      		 ·     New Rate (Effective July 23, 2024): 12.5% on LTCG exceeding ₹1 lakh.

      ·     This change applies to the sale of listed equity shares and equity-oriented mutual funds where Securities Transaction Tax (STT) is paid.

      ·     The LTCG tax rate for non-residents, including FIIs, has also been increased from 10% to 12.5%, aligning with resident taxpayers.
      Indexation Benefit ·       Unlisted Shares: Indexation allowed under Section 112. ·       No change announced for indexation benefits (confirmation awaited in the Finance Act).
      Rebate Under Section 87A ·       Taxpayers with net taxable income up to ₹7 lakh (under the new tax regime) could claim a full tax rebate under Section 87A. ·      Rebate is no longer available for short-term and long-term capital gains from equity shares, making all gains fully taxable.
      Exemption Under Section 112A ·       LTCG up to ₹1 lakh per financial year is exempt from tax. ·      Exemption limit increased to ₹1.25 lakh per financial year.
      Additional Tax Considerations ·       Surcharge: Applies if total income exceeds ₹50 lakh.

      ·       Cess: 4% Health & Education Cess on total tax.

      		 No Change
      Grandfathering Rule for LTCG ·       For shares purchased before 31st Jan 2018, the acquisition cost is adjusted to the highest market price on that date to limit taxable gains. No Change

       

      Key Takeaways from Budget 2025

      ✅ Higher LTCG Tax Rate: Increased from 10% to 12.5% for gains exceeding ₹1 lakh.
      ✅ Higher LTCG Exemption Limit: Increased from ₹1 lakh to ₹1.25 lakh per financial year.
      ✅ No More Rebate (87A) on Capital Gains: Investors can no longer claim this benefit.
      ✅ Impact on Foreign Investors: FIIs and non-residents now face 12.5% LTCG tax, up from 10%.
      ✅ Short-Term Capital Gains Tax (15%) Remains Unchanged.

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