The Finance (No. 2) Act, 2024 executed a comprehensive reset of asset holding periods and capital gains rates, bringing parity across asset classes that had long been governed by divergent rules. Knowing the exact holding-period threshold that shifts an asset from short-term (STCG) to long-term (LTCG) is essential to optimising post-tax returns.
Key facts & figures
The old 36-month criterion has been abolished. Assets are now classified under simplified 12-month or 24-month thresholds. For transfers on or after 23 July 2024:
| Asset class | LTCG holding period | STCG rate | LTCG rate |
|---|---|---|---|
| Listed equity / equity MFs (STT paid) | > 12 months | 20% flat | 12.5% (exempt up to ₹1.25 lakh) |
| Unlisted shares | > 24 months | Slab rates | 12.5% (no indexation) |
| Real estate (land / building) | > 24 months | Slab rates | 12.5%, or 20% with indexation if bought pre-23 Jul 2024 (residents only) |
| Gold & jewellery | > 24 months | Slab rates | 12.5% (no indexation) |
| Foreign assets | > 24 months | Slab rates | 12.5% (no indexation) |
| Debt MFs & MLDs (bought after 1 Apr 2023) | Always STCG | Slab rates | — |
| Unlisted bonds / debentures | Always STCG | Slab rates | — |
Recent changes
The STCG rate on listed equity (Section 111A) rose from 15% to 20%, and the LTCG rate (Section 112A) from 10% to 12.5%. To cushion retail investors, the annual LTCG exemption on listed equity, equity funds, and business trusts rose from ₹1 lakh to ₹1.25 lakh.
Section 50AA was widened: any transfer of unlisted bonds or debentures after 23 July 2024 is deemed short-term and taxed at slab rates regardless of holding. Parity was achieved on non-equity assets — gold, foreign equity, and unlisted shares are now uniformly taxed at 12.5% without indexation. From 1 October 2024, share buyback proceeds are taxed as deemed dividends at slab rates in the shareholder's hands, changing founder and institutional exit strategies.
Common pitfalls
- Assuming a debt fund held three years qualifies for 12.5% LTCG — if bought after 1 April 2023 it never becomes long-term; gains are always STCG at slab rates.
- Overlooking that surcharge on listed-equity capital gains is capped at 15%, while other income can attract up to 37% — mis-blending the two can lead to excess advance tax.
- Applying grandfathered indexation to unlisted shares or gold — the 20%-with-indexation option applies only to real estate (land/building), not financial instruments.
Frequently asked questions
How is a debt fund bought in 2020 taxed if sold today?
Because it was acquired before 1 April 2023, its historic status is preserved. If held over 24 months, gains are LTCG at 12.5% without indexation.
Does the ₹1.25 lakh exemption apply to property or unlisted shares?
No. It is limited to Section 112A assets — listed equity, equity-oriented funds, and business trust units where STT has been paid.
What holding period makes foreign stocks long-term?
Foreign stocks are treated as unlisted shares, so the long-term threshold is 24 months.
Is indexation completely gone?
For all new purchases, yes. The only exception is real estate (land/building) bought by a resident individual or HUF before 23 July 2024, where the 20%-with-indexation route can be chosen if more beneficial.
This article is for general information only and reflects our understanding of the rules at the time of writing. Tax and regulatory provisions change frequently and some references may be subject to further notification. It is not professional advice — please verify against the latest provisions, or consult a professional, before acting.