The 2024 Union Budget, like all other national budgets before, has brought with it a flurry of opinions ranging from the super cynical to the optimist’s bargain. Amongst all this, one specific update made the most noise: Long-Term Capital Gains (LTCG).
While taxes on LTCG were increased for some asset classes like Indian Equities, there was a silver lining with LTCG on US Stocks. What used to be taxed at 20% with indexation is now… *slow drumrolls* 12.5% without indexation!
Now, what does this mean for you, a rider, provider, and investor in the US Stock Markets? Let’s break this down with the help of an example. But before we get to it, let's define what Long Term Capital Gain is and how it differs from its antithesis, the Short Term Capital Gain.
The math is simple, any returns from US Stocks held for over 24 months (that’s 2 years), is LTCG. All other returns from US Stocks held for less than 24 months is a Short Term Capital Gain (STCG).
While the taxation for STCG remains as they were pre-Union Budget ‘24, LTCG have had an uphaul for those that have been playing the long game.
Pre-Union Budget Policy for LTCG | New Policy for LTCG |
20% (with indexation) | 12.5% |
That’s a whopping 37.5% decrease in taxes compared to pre-’24 rates! Whip out the fine china, it’s time to dine on higher returns!
Now, let's say you invested in your favourite US Stock in December of ‘21 for ₹1,00,000, when the stock price was $10, getting you 134 units of the stock. Cut to current day, the share price is $40, and your portfolio value is effectively ₹4,48,138 (good job on betting big).
Date | Invested amount | Per share $ value | Portfolio value (In Rs) |
Dec-2021 | ₹1,00,000 | $10 | ₹1,00,000 |
Jun-2024 | ₹1,00,000 | $40 | ₹4,48,138 |
Before the policy update, you would’ve paid 20% interest with indexation, amounting to ₹56,437.
Now with LTCG down to 12.5%, the interest you’re going to pay is ₹43,517. That’s a ₹12,920 worth of tax savings, or a 23% reduction in tax paid.
Before | Now | |
Old LTCG with Indexation | New LTCG without Indexation | |
Capital Gain | ₹2,82,183 | ₹3,48,138 |
Tax Rate(%) | 20% | 12.50% |
Tax paid | ₹56,437 | ₹43,517 |
Return after tax(%) | 38.52% | 56.17% |
A significant reduction in LTCG taxes from 20% to 12.5% makes US Stocks one of the most lucrative investment avenues. It’s now a lot more profitable to invest internationally than it has ever been.
Frequently Asked Questions
LTCG (Long-Term Capital Gains): If you held US stocks for more than 24 months, your gains were considered long-term and taxed at 20% plus surcharge and cess.
STCG (Short-Term Capital Gains): If you held US stocks for less than 24 months, your gains were considered short-term and taxed according to your income slab rate (depending on your chosen tax regime).
After the 2024 Union Budget, things have changed!
LTCG (Long-Term Capital Gains): If you hold US stocks for over 24 months, your long-term gains are taxed at a reduced rate of 12.5% plus surcharge and cess.
STCG (Short-Term Capital Gains): The tax rate for short-term gains on US stocks remains the same as before, based on your income slab and tax regime.