Important Amendments by The Finance (No. 2) Act, 2024 – Capital Gains

The maiden Budget of the Government in their third innings promises simplification and rationalisation of Capital Gains tax regime under the Income-tax Act, 1961 (“the Act”). With the said purpose, the Finance (No. 2) Act, 2024 (“FA (No. 2) 2024”) provides for standardisation of tax rates for the majority of short-term and long-term capital gains tax as well as period of holding of the majority of listed and unlisted capital assets. However, simultaneously, the Capital Gains Chapter of the Act has been amended at various other places making those provisions more complex and litigious thereby clearly contradicting the intention propagated by the Government.

This Article discusses the various amendments brought in by the FA (No. 2) 2024 under the said Chapter1 and the issues arising therefrom.

PERIOD OF HOLDING

Section 2(42A) of the Act determines “Period of Holding” relevant for the purpose of classifying an asset as short-term or long-term. Earlier, there were three holding periods, namely, 12 months, 24 months and 36 months. The period of 12 months was applicable for selected assets such as listed shares, listed equity oriented funds and zero coupon bonds. Further, the period of 24 months was applicable to unlisted shares and immovable properties, being land or building or both.