Any profit or gain arising from stock investment are considered as long term capital gains, if the holding period is more than 1 year. Until 23^rd July, 2024, Long term capital gains up to Rs. 1 Lakh in a financial year were exempted from tax. As per the new budget announced on 23^rd July 2024, the exemption has been increased from Rs.1,00,000 to Rs. 1,25,000. The tax rates on long-term capital gains have been increased from the earlier rate of 10% to a new rate of 12.5%.

Example:

Mr P bought 200 shares of Titan Ltd. At Rs. 800 per share on 1^st May, 2023.

Case 1: Shares sold before 23^rd July, 2024

Mr. P sold the same 200 shares of Titan at Rs. 1500 per share on 3^rd June, 2024. Holding period of the shares is more than 12 months.

Long Term Capital Gain = 1,40,000 (Up to Rs 1,25,000 is not taxed as per the provision)

Long term capital Gain Tax= (140000-125000)    = 15,000 X 10% = 1,500

Case 2: Shares sold after 23^rd July, 2024

Mr. P sold the same 200 shares of Titan at Rs. 1500 per share on 25^th July, 2024. Holding period of the shares is more than 12 months.

Long Term Capital Gain = 1,40,000 (Up to Rs 1,25,000 is not taxed as per the provision)

Long term capital Gain Tax= (140000-125000)    = 15,000 X 12.5% = 1,875

Case 3: Shares sold before 23^rd July, 2024 and also after 23^rd July, 2024

Mr. P sold the 90 shares of Titan at Rs. 1500 per share on 3^rd June, 2024. He sold the remaining 110 shares of Titan at Rs. 2000 per share on 25^th July, 2024.

Long Term Capital Gain on 90 shares = 63,000 (Up to Rs 1,25,000 is not taxed as per the provision)

Long Term Capital Gain on 110 shares = 1,32,000 (Up to Rs 1,25,000 is not taxed as per the provision)

In this case, Rs. 70,000 will be taxed at the new rate of 12.5%.

(Computation of 70,000 = 1,25,000 – 63,000 – 1,32,000 = 70,000)