when we see the 21st century and the magnitude of changes which has happened in the last few decades it is just phenomenal and very very exciting every year there are new technologies that make a difference in the world 2024 is turning out to be amazing for new inventions this year technology is changing the way we do almost everything and it's exciting to see what's next now in this world of YouTube shots YouTube videos Instagram wheels and 30-second content being consumed by the people most of the people have started sharing their success stories a lot their to richest stories and how they became successful after a lot of struggles now major chunk of population today which is digitally connected is consuming all these stories and has now become very very aspirational and amongst that class the biggest class is the middle class of our society which has now become aspirational the middle class wants to be rich they want to drive luxury cars they want to go to five star hotels want to wear designer clothes and want to live a very rich and lavish lifestyle for this currently there are two options which are in Buzz or which are in fashion first option is going for a business or a startup which is in Trend these days and second option is investing money at an early stage in financial sector or stock market of the country so people are investing money in stock markets or other Financial assets like buying a property buying gold or any other Financial assets whose value increases over a period of time and especially after covid-19 pandemic with the increase in financial literacy in our country people have started investing their money their savings into these assets rather than keeping their money in the bank accounts where the money is lying idle as the Corona virus known as covid-19 keeps spreading economic concerns continue to mount markets have seen a Major Impact in recent days and investors are worried about what the long-term effects might be we're starting to see a little bit of gain coming in on an intraday basis uh in fact it's up as much as 18% from the the first tick uh currently at around 90 rupees per share I've already wondered myself why do we have to hear this every night what the stock market is doing 70 record closing highs so far for the blasting through a seing in a record setting IPO investors who have been riding the wave when the stock market is booming we're made to believe the economy is booming is that we are on the road to prosper the skyrocketing stock market and that benefits everyone they're getting negative returns in relation to inflation so people have started becoming smart people have become smart and they're wanting to invest money in the financial sector into assets so that they could get a better return although many people might think that this is something which is very new but let me tell you this is not new at all if you see your own case as well your parents or your grandparents any one of them at certain point in their life would have thought of or would have purchased a property in their lifespan and the reason for purchase of that property would be that they would sell that property or sell that piece of land after 5 years 10 years when the value of the land appreciates and and they could gain good amount of profit after selling that piece of land so investing on assets Is Not A New Concept in our country it has become a buzzword in the current generation but it is something which has been ongoing in our country since last several Generations where people have bought lands and after buying it they usually sell it after 5 to 10 years and they earn a good amount of profit now if we see the budget 2024 which was presented on July 23rd there was a significant provision in relation to the capital gain Stacks in that particular budget and there was a change made in relation to the capital gains stacks and this particular change is going to have a very Major Impact a very significant impact on all these assets which middle class of our society is investing in where the aspirational middle class of our society is investing their hard-earned money hard-earned savings into which is why it becomes very very important for us to understand the key change now one more interesting thing to note here is that this particular change has been criticized from several quarters in the country whether it be retail investors whether it be stock market Brokers whether it be listed companies whether it be any other sector or any other area as well this change has been criticized but several other people have supported this change as well now what this capital gains tax is all about what are the changes introduced in the budget 2024 how are the changes different from the old regime and what are the positives and negatives of this change and what could be the way forward what could be the solution to remedy those negative impact all these things we'll be trying to understand in this particular session hello my name is pretal Singh and today's topic is capital gain stocks in India 5% teds rate on many payments is being merged into the 2% tedious rate and the 20% tedious rate it's been a crazy Blockbuster budget in terms of the number of changes to personal finance and tax rates everything which has been said in the budget Falls in place good fact this this new regime in terms of capital gains for property capital gains taxation is also proposed to be hugely simplified short-term gains on certain Financial assets shall henceforth attract a tax rate of 20% now before understanding the capital gain Stacks let us try to understand few key terminologies which we'll be using first question which we need to address is that what is capital now capital is any asset or resource which can generate wealth or which is used to generate wealth or give returns now it can be your financial Capital including cash or stocks it can be physical capital including Machinery or buildings or it can be human capital that is we people right Capital involves something which is a resource or an asset which can give us returns simple now second question which we need to address is what are the gains now in this sense in relation to capital gains refers to the profit which we earn or the positive return which we get after selling that Capital at a higher price or selling that asset at a higher price so when the assets or the capital is sold at a higher price than its initial value the profit is what we call as gains now in simple terms when the government charges tax from me on the gains which I make on the sale of a asset or on the sale of a capital that tax which government takes from me is what we call as capital gains tax that is tax lii on the capital gains that is on the gains after sale of an asset now since this is very very clear let us understand capital gains tax with the help of a very simple example now let's say there is a person named as Rahul now Rahul works as a software engineer in Microsoft and earns good amount of salary now let's say Rahul decides that he's doing a very good amount of savings he wants to invest that saving into an asset he wants to purchase a house so in 2020 Rahul purchased a property let's say worth 10 lakh Rupees and now in 2024 Rahul is thinking of selling that property and currently the price of that property is close to 15 lakh rupees now Rahul sold that property for 15 lakh rupees he bought the property at at 10 lakh Rupees in 2020 so in this four years Rahul was able to get a profit of 5 lakh rupees on the property which we call as the capital Gaines that is the return on the capital now let's say government decides to tax this particular gain which Rahul has made so government will liy a tax on this 5 lakh rupees amount and that tax which the government will liy on capital gains is what we call as capital gains tax I hope it is very very clear now there is one more concept which is involved in this let's say Rahul purchased the property for 10 lakh Rupees holded the property for few months and after few months he sold the property now in this case the gains which Rahul would be making would be known as shortterm capital Gaines based on the time period for which Rahul holds that particular property now let's say Rahul holds that property for more than certain prescribed limit or prescribed time period let's say that time period is 12 months well let's say it's 24 months whichever you want it to be so if Rahul holds that property above that prescribed time period then that property gains which Rahul would be making would be known as long-term capital gains so short-term capital gains or long-term capital gains it depends on the time period for which Rahul holds that particular asset or that particular property and that time period is what we call as holding period in financial terms now this holding period is different for two different classes of assets according to the government now the first class of assets are the listed assets that is the stocks or the shares now in that case the holding period is of 12 months so that means if Rahul holds a stock or a share for more than 12 months it will the gains will be known as long-term capital gains and if he holds that asset that stock or that share for less than 12 months and he sells that particular asset before 12 months that return or that gain will be known as shortterm capital gains simple that is in relation to First Class of asset that is stocks or shares we categorize them under the heading of listed assets now there is second class also that is unlisted assets here the criteria is different in case of unlisted assets or any other assets the holding period is 24 months that means if Rahul holds any unlisted asset including a proper for less than 24 months and he earns a gain on that particular property that will be known as short-term capital gains and if he holds that property for more than 24 months and after 24 months he sells that particular property that gain will be known as long-term capital gains and when the government levise taxes on short-term capital gains and long-term capital gains that tax again is what we call as short-term capital gains tax and long-term capital gains tax now since the classification is very clear let us try to understand what were the key changes introduced by the government in this budget of 2024 2025 now first very prominent change was in relation to the short-term capital gain Stacks now short-term capital gain Stacks in relation to stocks or Equity Funds that is shares that has been increased to 20% earlier the short-term capital gains tax on Equity or stocks was 15% now it has been increased to 20% so there has been an increase in the short-term capital gains tax second change is in relation to long-term capital gains tax now long-term capital gains tax has been made uniform and equal for all the asset classes and new rate is introduced that is 12.5% now in the earlier regime long-term capital gains STX varied from 10% to 20% and now it has been fixed at 12.5% for all the classes of asset that means it's a uniform rate for all the assets and that rate is 12.5% that is a relation to long-term capital gains stxs now here comes the most interesting part before the budget of 2024 these long-term capital gain STX which was there in this the people the investors used to get the benefit of indexation now that indexation benefit has been removed in the budget of 2024 that is a major change and this is the most important talking point because of which this move has been criticized by a lot of people now The Logical question is what is this indexation now we all know that over a period of time with passage of time money loses its value now the value of 100 rupes note what it was in 2010 is not the same as in 2024 in 2010 the value of that 100 rupe Noe was much much higher as compared to its value in 2024 over a period of time the value of money decreases 100 rupe can buy me less chocolates in 2024 than what it could have bought me in 2010 and this particular thing is because of inflation that means increase in prices of goods and services over a period of time now since inflation exists and inflation is there whenever we calculate long-term capital gains we need to adjust those gains with respect to the inflation levels and and then we calculate the real and actual profit which is made by the investor before that it is not the real profit it is the nominal profit of the nominal gain but if we want to calculate the gain on a real basis we have to adjust that long-term capital gain with inflation and basically we have to negate the effect of inflation in that and this is where the role of indexation comes and this is where indexation comes into play indexation for real estate gold and some other asset classes uh the rate presently is or was till yesterday 20% with indexation the point there is we wanted to simplify the approach to taxation long-term gains on all financial and non-financial assets on the other hand will attract a tax rate of 12.5% restore indexation on long-term capital inv now indexation is a method to adjust the price of an asset in relation to the inflation and show us the actual capital gains so basically indexation allows the taxpayer to neutralize the impact of inflation while paying the taxes on capital gains and without indexation particularly in cases where the assets are holded over more period of time or longer period of time the gains may appear extremely high but it may not paint a realistic picture for us the gains might appear that they are very very high if we do not take into account inflation and then it won't be a realistic picture because in reality we have to minus or we have to subtract the effect of inflation to calculate the gain on real basis now in budget 2024 this indexation was basically removed from calculation of capital gains tax long-term capital gains tax and a fixed uniform rate of 12.5% was introduced by the government irrespective of the inflation levels irrespective of any inflation indexation long-term gains on all financial and non-financial assets on the other hand will attract a tax rate of 12.5% the long-term capital gains tax has been reduced to 12.5% from 20% now investors while seeing this change were definitely very very Furious they definitely wanted the government to take this step back and and to roll the step back and they argued that with this particular change the tax burden on the people the tax burden on the investors will increase to a very very great limit and they would have to pay twice or thce of the tax which they were paying earlier now to understand the situation again in a better way now let's take an example let's say you are an investor and you purchased the property in 2001 for 1 CR rupees now let's say that value of the property kept on increasing 6% every year so currently the value of the property is close to 4 17 lakh rupees after it has increased 6% every year and now you plan to sell it so now you plan to sell it at 4 17 lakh rupes and you purchase the property at 1 CR rupees but if we adjust inflation also then your purchasing price in current terms in 2024 terms would not be 1 CR it would be 3 60 lakh RUP because inflation has also increased so inflated price would be 3 60 lakh rupees and what is the current price of the property it is close to 417 lakh rupees so in reality if you sell the property you would just be making profit of 57 lakh rupees and before 2020 you would have to pay 20% tax on this 57 lakh rupees which comes close to 10 lakh 80,000 rupees so in this whole scenario in the older regime the profit would have been 57 lakh because we adjusted the 1 CR price with inflation that is why profit is 57 lakh now in that profit you were paying 20% tax and that was 10ak 80,000 rupes approximately but now let us see what will happen in the newer regime in the current regime the benefit of indexation has been removed so what will happen now the property which you bought for 1 CR rupees will remain at 1 CR rupes only no inflation would be accounted and the current price is 4 17h rupes now when you sell the property at current price at 4 17 lakh rupees the gain which you will be making would be 417 lakh minus 1 CR rupees that would be 37 lakh rupees that will be the gain in the newer regime after the budget of 2024 earlier the gain was 57 lakh rupees after we adjusted inflation now since we have not adjusted inflation the gain is 37 lakh rupees and now you would have to pay 12 5% tax on this 317 lakh rupees which is approximately 39 lak 60,000 rupes approximately now on one hand with indexation in the older regime we were paying tax on the same property for 10 L 80,000 rupees that was the tax in the older regime long-term capital gains tax and in the new regime same property is there there is no indexation and we would have to pay tax of 39 lakh 60,000 rupes approximately which is a significant shift approximately 29 lakh rupes tax more additional 29 lakh rupees tax you have to pay after the budget of 2024 and this is a very very serious situation and a very very huge burden on the taxpayer because essentially taxpayer would have to pay Thrice the amount of tax which they were paying earlier with the older calculation now this is the very reason that why capital gains taxes Talk of the Town and why many people many investors are Furious about this particular issue and why they want the government to take it back now since it is a bit technical part I would request you all to revise the whole portion again so that you can again get a better understanding of all the concepts which you studied till now now as always there are two sides to the coin on one side there are definitely people or investors who are criticizing this move of the government and on the other side there is the perspective there's the opinion of the government of India as well now our honorable Finance Minister shrimati nirmala sitaraman said that the sole aim of introducing this tax rate change was to introduce simplification in the calculation of long-term capital gains STX and her point is also not totally wrong she said that there were no Revenue considerations in this particular change the sole aim was to simplify the whole process and to have a one uniform tax rate that was 12.5% earlier it was 10% to 20% based on indexation or non-ind indexation but our finance minister said that we wanted to simplify the process we wanted to have a uniform rate so that the calculation remains simple that is why they introduce 12.5% rate however many experts have pointed out that if this change gets introduced there would be a very high frequency of secondary Market transactions of real estate in our country because no one would be holding a property for more than 3 to 5 years and they'll be trying to sell property again and again and also one more major concern was in relation to the cash transactions that this move might incentivize the property owners to go for more cash-based transactions so that they can deflate the value of the asset on papers and they can do the cash transactions and they can reduce the tax liability which they had to pay to the government by showing lesser amount of actual transaction in the papers but there is a very important twist and turn to the story on August 6th after all these criticisms and backlash from the investors from different Quarters on 6th of August 2024 the finance ministry introduced an amendment to the finance bill then Finance Minister Nala Saran introduced the banking laws Amendment bill pass the finance bill 2024 after government relax government is proposing amendments in the finance bill and that amendment was basically a relief to the investors investors were given two choices one choice was that investors can go for the newer regime where there is no indexation and the tax rate is 12.5% and investors were given a choice that any property which you would have bought before July 23rd for that you have second option also that you go for the older regime you go for 20% tax rate and have indexation benefit you calculate the long-term capital gains tax from both the methods newer method of 12.5% without indexation or the older method of 20% with indexation calculate the long-term capital gain STX from both the methods newer method of 12.5% without indexation or the older method of 20% with indexation you calculate tax long-term capital gains tax from both the methods with whichever method the tax amount is the lowest you pay that amount of tax to the government this is a major major relief to the class of investors who were wanting to sell their assets but they were too skeptical and too scared of paying more tax to the government than before so now the government has basically solved this problem and the government has said that you are having a choice you pay with the older regime or you pay with the newer regime in whichever case the tax is the lowest you pay that tax to the government this is what government has introduced in the amendment and the very next day that is 7th of August 2024 this amendment and the finance bill was passed in the lokha now I hope that capital gains capital gain Stacks the short-term and long-term classification of it the changes introduced in the budget and the Amendment introduced afterwards it is all crystal clear to all of you and if it is not again I would request you all to watch the video again to have a better understanding of this particular topic however there is one more issue which we need to talk about or which we need to discuss upon and that is in relation to the overall taxation system in our country recently you must have heard several slogans being erased by several politicians and from different quarters as well that Indians are basically paying taxes like in England and they're getting service like inalia world class Health that we in India today pay taxes like England to get services like Somalia now this is a very very serious issue which we need to discuss upon and which we need to gain perspective of and we need to have a separate discussion alog together on the overall taxation system in our country what are its loopholes how it can be improved and what is the current taxation regime in our country how much taxes we as middleclass people have to pay this will need a separate episode so if you want me to make a separate episode on this do let me know in the comment section also we all read your wonderful comments in every episode thank you for being very generous with your compliments if you have any suggestions or any opinions in relation to this particular change in relation to capital gains tax please let me know in the comment SE I'll be very happy to meet them all the very best and have a beautiful day [Music]