How recent tax reforms have quietly redrawn the investment landscape

Taxation is often treated as an afterthought—something to worry about once returns are earned. The Finance Act, 2024 has decisively changed that mindset. By reshaping capital gains taxation, removing indexation benefits, introducing a uniform long-term tax rate, and adding special riders for real estate, the law has made taxation a front-end consideration in investment decisions.

Understanding how each asset class now behaves under tax law is critical, not just for compliance, but for preserving real returns.

1. Equity & Equity-Oriented Mutual Funds: Efficient Yet More Expensive Than Before

Equity continues to enjoy a relatively favourable tax position, though the Finance Act, 2024 has raised the cost of frequent profit-booking.

a. Short-term capital gains (holding up to 12 months) are now taxed at 20%, replacing the earlier 15%.

b. Long-term capital gains (holding beyond 12 months) are taxed at 5%, with an enhanced exemption threshold of ₹1.25 lakh per year.

The increase in the STCG rate subtly discourages short-term churn and nudges investors toward longer holding periods. Equity remains tax-efficient over time, but the margin of advantage has narrowed.

2. Futures & Options (F&O): Market Profits, Business Treatment

F&O trading remains outside the scope of capital gains taxation.

a. Income from F&O is classified as non-speculative business income

b. Profits are taxed at normal slab rates, potentially going up to 30% plus surcharge and cess.

c. Losses can be set off against other business income and carried forward for eight years.

d. Turnover-based thresholds may trigger tax audit requirements, even for retail traders.

The real burden here is not just tax, but compliance discipline—books of accounts, audits, advance tax, and reconciliations.

3. Real Estate: The Biggest Shift Under the Finance Act, 2024

Real estate has undergone the most structural change.

Earlier Regime

a. Long-term gains (holding beyond 24 months) were taxed at 20% with indexation, often resulting in low effective tax.

b. Short-term gains were taxed at slab rates.

Current Regime (Post 23 July 2024)

a. Long-term capital gains are subject to a 12.5% tax, with no indexation benefit.

b. Indexation benefit has been removed for new transactions.

c. Short-term gains, where the holding period is up to 24 months, are taxed as per applicable slab rates.

Transitional Relief (Important Rider)

For resident individuals and HUFs who acquired property before 23 July 2024, the law provides a relief mechanism:

a. Tax can be computed under either of the following methods:

b. 20% with indexation, or

c. 5% without indexation

The option resulting in lower tax liability may be chosen.

This relief is not available to NRIs, for whom the new regime applies compulsorily.

Impact on Calculation

Capital gains computation is now simpler but often harsher:

a. Sale consideration minus actual cost (and cost of improvements)

b. No inflation adjustment in most cases
This significantly increases taxable gains for long-held properties, especially inherited or legacy assets.

4. Debt Mutual Funds & Non-Equity Financial Assets

Debt mutual funds and other non-equity assets have effectively lost their earlier tax arbitrage.

a. Long-term capital gains are chargeable to tax at 12.5% without allowing indexation.

b. Holding period thresholds have been rationalised, generally aligning at around 24 months for long-term classification.

c. Many debt instruments are now taxed at slab rates, making post-tax returns comparable to fixed deposits.

The choice of debt funds must now be justified by liquidity, duration strategy, or portfolio stability—not tax efficiency.

5. Gold: Simplified but Less Forgiving

Gold—whether held physically, through ETFs, or mutual funds—now follows the unified capital gains structure.

a. Long-term gains are taxed at 5% without indexation.

b. Short-term gains are taxed at slab rates.

Sovereign Gold Bonds remain a partial exception, where capital gains on maturity are exempt, though interest remains taxable. For other forms, inflation no longer softens the tax impact.

6. Crypto & Virtual Digital Assets: Still in a Separate Universe

Cryptocurrencies remain untouched by the broader capital gains reforms.

a. Gains are taxed at a flat 30%, irrespective of holding period.

b. Losses cannot be set off against any income.

c. A 1% TDS applies on transactions, impacting liquidity.

Crypto remains a high-risk asset not just from a market perspective, but from a tax standpoint as well.

Cross-Asset Perspective: Uniformity With Consequences

The Finance Act, 2024 has brought:

a. A uniform long-term capital gains rate of 12.5% across most assets

b. Removal of indexation benefits for new transactions

c. Simplified computation, but often higher tax outflow

This uniformity reduces complexity but shifts the tax burden upward, especially for long-term holders of real estate, gold, and non-equity assets.

Conclusion: Tax Strategy Is Now an Investment Strategy

The post-2024 tax regime sends a clear signal: taxation is no longer a back-end calculation—it is a core variable in asset selection and timing.

Investors must now:

a. Re-evaluate holding periods

b. Factor in transition rules carefully

c. Actively use exemptions and reinvestment provisions

d. Assess returns strictly on a post-tax basis

Markets may generate returns, but under the new law, tax planning determines how much of those returns you actually keep.

For any clarifications or queries, please feel free to reach out to us at:
admin@fintracadvisors.com

Disclaimer:

The content published on this blog is for informational purposes only. The opinions expressed here are solely those of the respective authors and do not necessarily reflect the views of Fintrac Advisors. No warranties are made regarding the completeness, reliability, or accuracy of this information. Any actions taken based on the information presented in this blog are solely at the reader’s risk, and we will not be liable for any losses or damages resulting from its use. It is recommended that professional expertise be sought for such matters. External links on this blog may direct users to third-party sites beyond our control. We do not take responsibility for their nature, content, or availability.