Budget 2025: All the latest tax rates and holding period for all assets

Unit Linked Insurance Plans (ULIPs) with annual premiums exceeding Rs 2.5 lakh will now be subject to long-term capital gains (LTCG) tax at a rate of 12.5%, effective from April 1, 2026

The Union Budget 2025, presented by Finance Minister Nirmala Sitharaman on February 1, has introduced significant changes to the income tax structure. However, it has kept the tax rates and the holding period of assets unchanged for determining whether it is to be taxed as long term capital gains or short term. As a result, the existing rules for Long Term Capital Gains Tax (LTCG) and Short Term Capital Gains Tax (STCG) will continue to apply for financial year 2026 (assessment year 2026-27).

 

Changes in income tax slabs

 

The most notable announcement was the revision of income tax slabs under the new tax regime. The new structure is as follows:

 

 

Income up to Rs 4 lakh: Nil

 

Income from Rs 4 lakh to Rs 8 lakh: 5 per cent

 

Income from Rs 8 lakh to Rs 12 lakh: 10 per cent

 

Income from Rs 12 lakh to Rs 16 lakh: 15 per cent

 

Income from Rs 16 lakh to Rs 20 lakh: 20 per cent

 

Income from Rs 20 lakh to Rs 24 lakh: 25 per cent

 

Income above Rs 24 lakh: 30 per cent

 

“Nirmala Sitharaman has completely exempted individuals earning up to Rs 12,00,000 per annum from paying income tax, with salaried taxpayers benefitting from an additional Rs 75,000 standard deduction, effectively raising the tax-free threshold to Rs 12,75,000. This reform is aimed at boosting disposable income, stimulating domestic consumption, and providing substantial relief to the salaried class. However, for those earning beyond this threshold, a revised tax structure has been introduced, ensuring a fair and proportionate tax contribution,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas.

 

Alay Razvi, managing partner, Accord Juris explains how tax will be calculated on different income:

 

 

 

Income tax return and holding period for various assets for LTCG and STCG post Budget 2025:

 

Capital assets are classified into various types, including listed equity shares, mutual funds, tax-free bonds, debentures, unlisted shares, immovable property, and other financial instruments. The tax treatment of capital gains arising from these assets depends on the holding period, which determines whether the gain is categorised as LTCG or STCG.

 

Finance Minister Nirmala Sitharaman announced on Saturday that Unit Linked Insurance Plans (ULIPs) with annual premiums exceeding Rs 2.5 lakh will now be subject to long-term capital gains tax at a rate of 12.5 per cent, effective from April 1, 2026.

 

For listed equity shares and listed equity mutual funds, the holding period for them to be considered as long-term capital assets is 12 months. The tax treatment for LTCG on these assets allows for an exemption of gains up to Rs 1.25 lakh, while the balance is taxed at 12.5 per cent without indexation benefits. On the other hand, STCG is taxed at a flat rate of 20 per cent, provided the Securities Transaction Tax (STT) is paid at 0.1 per cent each by the buyer and seller for equity shares and 0.001 per cent by the seller for mutual funds.

 

Listed tax-free bonds and listed debentures also have a holding period of 12 months for classification as long-term capital assets. LTCG on these instruments is taxed at 12.5 per cent without the benefit of indexation, while STCG is taxed at applicable slab rates. However, interest earned from notified tax-free bonds remains exempt from taxation.

 

Debt mutual funds, where more than 65 per cent of investments are in debt and money market instruments, have different tax treatments based on the acquisition date. If purchased before April 1, 2023, LTCG is taxed at 12.5 per cent without indexation. However, if acquired on or after April 1, 2023, the gains are taxed at applicable slab rates, and indexation benefits are not available. Similarly, STCG is taxed at slab rates regardless of the acquisition date.

 

Unlisted shares have a holding period of 24 months to qualify as long-term capital assets. In such cases, LTCG is taxed at 12.5 per cent without indexation, while STCG is taxed at slab rates. Unlisted debentures and unlisted bonds also have a holding period of 24 months, but LTCG and STCG arising from them are both taxed at the applicable slab rates, without the availability of indexation benefits.

 

For immovable property, a holding period of 24 months is required to classify gains as long-term. If acquired before July 23, 2024, LTCG is taxed at either 20 per cent with indexation or 12.5 per cent without indexation. However, for properties acquired on or after this date, LTCG is uniformly taxed at 12.5 per cent without indexation. In contrast, STCG on immovable property is taxed at applicable slab rates.