Blog Details
Budget 2024: Change in Capital Gains Tax for Unlisted Shares
Tue, 1 Oct 2024
2 mins
Recent changes to the capital gains tax regime have brought about a significant positive change for investors in unlisted equity investments. With the new policy, the long-term capital gains tax on the sale of unlisted equity investments has been reduced from 20% (with the indexation benefit) to 12.5% (without the indexation benefit). This update is effective from 23rd July 2024.
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Key changes in taxation on unlisted shares
- Listed and unlisted equity investments will now be taxed at a uniform rate of 12.5% on long-term capital gains.
- Listed equity investments have witnessed an increase from 10% to 12.5%, aligning both asset classes under the same tax regime.
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How will your investment strategy change?
- This levelling of the playing field encourages a diversification in investment portfolios.
- Investors may now consider unlisted equity investments more favourably.
- However, one should be aware that the holding period required for an investment to qualify as "long-term" differs between the two asset classes.
- Unlisted financial assets require a holding period of at least two years to attain "long-term" status, as opposed to the one year required for listed financial assets.
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To conclude:
The recent revision in the capital gains tax for unlisted shares represents a noteworthy advancement in the investment landscape.
By making unlisted equities more appealing and tax-efficient, the government invites a broader spectrum of investors to diversify their portfolios and engage with a market segment that was previously viewed as less advantageous due to tax disparities.
It's an opportune moment for investors to reconsider their investment strategies and for financial consultants to guide their clients through these changes for optimized investment outcomes.
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