Following some media reports that claimed LTCG rate hike in the new Income Tax Bill, 2025, the Income Tax Department has issued a clarification to clear the air:
The ITB 2025 aims at language simplification and removal of redundant/obsolete provisions. It does not seek to change any rates of taxes.
Amid growing chatter that the new Income Tax Bill, 2025 is proposing a hike in long-term capital gains (LTCG) tax rates, the Income Tax Department has issued a pointed clarification, stating that there is no change in tax rates, including those on LTCG.
“The Income Tax Bill, 2025 aims at language simplification and removal of redundant/obsolete provisions. It does not seek to change any rates of taxes,” the department stated on X (formerly Twitter), adding that any ambiguity would be addressed during the Bill’s passage in Parliament.
LTCGs are basically any profit or gains you earn from the transfer or sale of capital assets like shares, property, bonds, etc., and these are subject to income tax under the ‘income from capital gains’ category.
The LTCG that arise from sale of capital assets like property or stocks are taxed when held for a period of more than 24 months (12 months in case of listed shares and equity funds). Under the current tax regime, long term gains exceeding Rs 1.25 lakh in a financial year are taxed at a rate of 12.5 per cent.
The current LTCG rates are not uniform, rather they vary based on the type of capital asset sold and the date of sale. This is crucial due the new tax rate structure which came into effect starting July 23, 2024.
Here’s how different assets are taxed as long-term capital gains:
1. Listed Equity Shares, Equity-Oriented Mutual Funds, and Units of Business Trust:
If sold before July 23, 2024: Taxed at 10 per cent without indexation.
If sold on or after July 23, 2024: Taxed at 12.5 per cent without indexation.
This applies only if gains exceed Rs 1.25 lakh in a financial year.
2. For the sale of land and buildings
If sold before July 23, 2024: 20 per cent with indexation.
If sold on or after July 23, 2024: The default rate is 12.5 per cent without indexation.
Individuals and Hindu Undivided Families (HUFs) have the option of either paying 12.5 per cent without indexation or 20 per cent with indexation (only if the asset was acquired on or before July 22, 2024).
3. For other capital assets like gold, debt funds, and unlisted shares, the rate applies as follows;
If sold before July 23 2024, 20 per cent rate applies with indexation
If sold after July 23 2024, 12.5 per cent without indexation.
The draft of Income Tax Bill 2025 seeks to replace the Income Tax Act of 1961 and is being seen as a major overhaul of the tax document.
The Bill was introduced in the Parliament earlier this year and was recently examined by a Select Committee. The report submitted by the parliamentary panel on July 21 includes over 280 recommendations, none of which suggest increasing LTCG tax rates.
Simplifying definitions (like “capital asset” and “micro enterprise”)
It has put some provisions in a structured tabular format for clear understanding
Restoring deductions (such as inter-corporate dividends and standard deductions for municipal taxes).
Compliance relief (like penalty waivers for small taxpayers and support for charitable trusts).
Removing outdated provisions from the 1961 Act.
The Bill is expected to be implemented from April 1, 2026 (Financial year 2026) after it is passed in Parliament.
There is no LTCG rate hike in the proposed Bill. The revised rates already came into effect from July 23 2024, and are part of the current tax framework. They are not a result of the new draft legislation. The Income Tax Department has made it clear: the 2025 Bill is about streamlining, not reshaping, India’s tax rate structure.
For those planning asset sales or investment decisions based on LTCG treatment, it is always best to stay updated through official government sources and not get swayed by speculative reports circulating on the internet.
