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What TV doesn't, print can't; we deliver.
Finance Minister Nirmala Sitharaman announced revisions to tax rates on equity investments during her presentation of the Union Budget for the fiscal year 2024–25.
NEW DELHI: Finance Minister Nirmala Sitharaman announced revisions to tax rates on equity investments during her presentation of the Union Budget for the fiscal year 2024–25.
Effective immediately, short-term capital gains (STCG) tax on equity investments held for less than one year has been increased from 15% to 20%. Similarly, the tax rate on long-term capital gains (LTCG) from equity investments held for over one year has been raised to 12.5% from the previous 10%. This adjustment marks a departure from the previous LTCG tax structure, which taxed gains exceeding ₹1 lakh per financial year at a rate of 10%.
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In addition to these changes, Sitharaman also announced a new tax regime for transactions in the equity derivatives segment (F&O), imposing a tax of 0.02% and 0.01% on different categories of trades. Furthermore, income received from share buybacks will now be subject to taxation in the hands of the recipients.
The Finance Minister clarified that certain financial instruments and specific non-financial assets will continue to attract the earlier rates of capital gains tax, distinguishing them from the revised rates applicable to equity investments.
Addressing the complexity surrounding capital gains tax, Sitharaman introduced measures to simplify the system, declaring that listed financial instruments held for more than one year will now be classified as long-term investments. This move is expected to streamline the capital gains tax structure and provide clarity to investors.
Recognizing the impact of these tax changes on individual taxpayers, the Finance Minister also raised the capital gains exemption limit on certain financial assets to ₹1.25 lakh per year, specifically targeting the middle and upper-middle-class segments.
Sitharaman also announced the removal of the indexation benefits for the sale of property in the Union Budget, and also reduced the rate of long-term capital gains tax on property sales to 12.5 percent, from the existing 20 percent.
Owing to the removal of indexation, property sellers will not be able to inflate the sale price of the property by tying the purchase price to the cost inflation index, or CII, issued by the Income Tax Department, used to compute capital gains tax.
Following the FM’s announcement, benchmark indices, Sensex and Nifty50, dropped sharply, declining about 1.6% each.
