Budget There has been a change in the rate and calculation of capital gains tax on all asset classes (shares, mutual funds, gold and property). Along with this, the benefit of indexation on the sale of gold and property has been abolished. This has changed the mathematics of tax burden. Now the big question is where would it be better to invest after the budget? Where will we get great returns on investment and also have to pay less tax? Let’s know.
What changes in the budget on gold?
Budget 2024 has reduced the holding period for capital gains on gold from 36 months to 24 months to treat it as long term capital gain and also reduced the LTCG tax rate to 12.5%. Also, the indexation available for LTCG calculation for gold has been removed. Earlier, indexation was allowed while calculating long term capital gains tax on sale of gold and gold jewellery. This allowed reducing the taxable capital gain by increasing the price according to the inflation index. But now this will not happen.
What changes in the budget on property?
Budget 2024 has abolished the indexation benefit on property. Now, a uniform 12.5% long term capital gain tax will have to be paid on the profit made by selling house property. Earlier, long term capital gain tax was 20% but the benefit of indexation was available. Tax experts say that this will increase the tax burden on selling property. However, this will be applicable only on property purchased after April 2001. It will not apply to inheritance and property purchased before 2001.
Budget change on shares and mutual funds?
Currently, short term capital gain tax was levied on sale of shares and mutual fund schemes for 12 months or less. LTCG is levied at a flat rate of 15% under Section 111A. Long term capital gain tax was levied on holding for more than 12 months. 10% capital gain tax was levied on income up to Rs 1 lakh. Now in the budget, it has been announced to increase the short term capital gain tax from 15% to 20% and the long term capital gain tax rate from 10% to 12.50%. However, it has also been proposed to increase the long term capital gain from ₹ 1 lakh to ₹ 1,25,000.
Now the big question is where is it most profitable to invest?
According to financial and tax experts, shares and mutual funds have emerged as the best investment medium after the budget. Despite the increase in tax rates, the returns received in it will not be affected much because now the long term capital gain has been increased to Rs 1.25 lakh. If we talk about gold, the custom duty on gold and silver has been reduced from 15% to 6%. Due to this, gold has become cheaper by about Rs 5000. Silver has also become cheaper by about Rs 8000. This decline can be seen further. Therefore, it would not be right to invest now. If we talk about property, the price of houses and shops in most cities has more than doubled in the last two years. At the same time, the tax burden has increased due to the end of the benefit of indexation. Therefore, very good returns cannot be expected in the next few years.
Now you have to decide whether you are a long term investor or a short term investor? Invest according to your financial goals. Before investing, definitely take advice from a financial expert.
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