Union Budget 2024: LTCG Tax on Gold Reduced to 12.5% with Adjusted Holding Period

The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, brought significant changes to the taxation of long-term capital gains (LTCG) on gold investments. The LTCG tax on gold has been reduced from 20 percent to 12.5 percent, and the holding period to qualify for LTCG treatment has been shortened from 36 months to 24 months.

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Union Budget 2024 has reduced the holding period for capital gains on gold as long term capital gains to 24 months and brought down the LTCG tax to 12.5 per cent from 20 per cent with indexation

Under the new rules, which will take effect from July 23, 2024, the benefit of indexation for calculating LTCG on gold has been removed. Indexation previously allowed investors to adjust the acquisition cost of gold for inflation, thereby reducing the taxable capital gains. With the removal of this benefit, the taxable capital gains will be calculated without any adjustment for inflation.

Previously, investors needed to hold gold for at least 36 months for the gains from its sale to qualify as long-term and be taxed at 20 percent. Now, gains from gold held for over 24 months will be taxed at a flat rate of 12.5 percent. However, short-term capital gains on gold will continue to be taxed at the individual’s applicable income tax slab rate.

The finance minister also announced an increase in tax rates for all financial and non-financial assets. The tax on LTCG for these assets has been raised to 12.5 percent from the previous 10 percent, and the tax rate on short-term capital gains has increased from 15 percent to 20 percent.

These changes are part of a broader effort by the government to streamline the tax structure and make the taxation of various investment gains more consistent. By reducing the holding period and lowering the LTCG tax rate on gold, the government aims to encourage investment in gold while ensuring a fair tax structure that does not overly burden taxpayers.

The adjustments in the tax regime for gold and other assets reflect the government’s commitment to creating a balanced and growth-oriented economic environment, addressing both investor concerns and revenue considerations.