500% increase in long-term capital gains declarations before tax increase

Short-term capital gains declarations had also been increasing after the pandemic

The amount of long-term capital gains declared across all taxpayers surged multifold ahead of the tax increase declared on Tuesday.

The total amount of long-term capital gains declared across all taxpayers was up 504 per cent since before the pre-pandemic stock market boom. It rose to Rs 8.6 trillion in 2023-24, compared to Rs 1.4 trillion in 2018-19, shows an analysis of data from the Centre for Monitoring Indian Economy (CMIE). The number of those declaring long-term capital gains has risen to nearly 80 million.

Finance Minister Nirmala Sitharaman increased tax rates on both long-term and short-term capital gains on Tuesday.

 

“Short-term gains on certain financial assets shall henceforth attract a tax rate of 20 per cent, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate. Long-term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent. For the benefit of the lower and middle-income classes, I propose to increase the limit of exemption of capital gains on certain financial assets to Rs 1.25 lakh per year,” she said during the budget speech.

The short-term capital gains tax data shows an increase in the number of people declaring taxes as well as the amount declared after the pandemic. The highest short-term capital gains in recent years was in 2022-23 at Rs 2.2 trillion.

Long-term capital gains declared were at their highest in at least 12 years in 2023-24 at Rs 8.6 trillion.

The budget added that "listed financial assets held for more than a year will be classified as long-term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term."

Short-term capital gains were earlier taxed at 15 per cent for shares listed on the stock exchanges. Long-term capital gains were taxed at 10 per cent.