India’s Central Board of Direct Taxes (CBDT) issued a set of Frequently Asked Questions (FAQs) to clarify details of the new capital gains regime outlined in the Union Budget 2024 On 24 July 2024. These clarifications come in the wake of proposed amendments included in the Finance (No. 2) Bill, 2024 (FB 2024), which was introduced in the Lok Sabha on 23 July 2024.
The amendments aim to streamline the capital gains tax system and are expected to take effect from 23 July 2024, applying to any transfers made on or after this date. The CBDT’s FAQs address key aspects of the new regime, including changes to the taxation of capital gains, adjustments to holding periods, revisions to the rate structure, and the continued availability of rollover benefits.
The FAQs provide clarity on who will benefit from these changes, such as the reduction of the long-term capital gains tax rate from 20% (with indexation) to 12.5% (without indexation), and the new exemption limits for gains on the sale of listed equity shares, equity-oriented mutual funds, and business trusts under Section 112A of the Income-tax Act, 1961 (ITA). Additionally, the FAQs explain the rationale behind these reforms, which are designed to simplify the tax regime and benefit a broad range of taxpayers.
