What TV doesn't, print can't; we deliver.
What TV doesn't, print can't; we deliver.
NEW DELHI: In the Union Budget 2024 presented on July 23, Tuesday, Finance Minister Nirmala Sitharaman announced significant changes to the capital gains tax rates on equity investments, a move expected to impact investors and market dynamics.
The short-term capital gains (STCG) tax on equity investments held for less than a year will increase from 15% to 20%. “The rate for short-term capital gain under provisions of section 111A of the Act on STT-paid equity shares, units of equity-oriented mutual funds, and units of a business trust is proposed to be increased to 20% from the present rate of 15% as the present rate is too low and the benefit from such a low rate is flowing largely to high-net-worth individuals.
Other short-term capital gains shall continue to be taxed at the applicable rate,” stated the budget memorandum. Similarly, the long-term capital gains (LTCG) tax on equity investments held for more than a year will be raised from 10% to 12.5%. Sitharaman emphasised that these changes aim to simplify the taxation approach and ensure a fairer distribution of tax benefits. “We wanted to simplify the approach to taxation, also for the capital gains.
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Second, if anything, the average taxation has come down. When we say it is 12.5 percent, we have worked out for different classes. But the point is that we have brought it down from below average to 12.5 percent, which is the lowest if you look at several years, encouraging investment in the market,” she explained.
In addition to these changes, the Securities Transaction Tax (STT) on futures and options (F&O) securities will be increased by 0.02% and 0.1%, respectively, to discourage retail investors from trading in this risky market segment. Following these announcements, domestic markets reacted negatively, with the Sensex dropping over 1,000 points at one point, though it stabilized towards the market closing.
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Other notable changes include the exemption of long-term capital gains up to ₹1.25 lakh annually, up from the current ₹1 lakh. For listed bonds and debentures, the LTCG tax is proposed to be reduced to 12.5% from 20%, while the STCG rate remains unchanged. In the case of unlisted bonds and debentures, LTCG will now be levied at applicable slab rates instead of a flat 20% rate, with no change to the STCG rate.
For other assets like property and gold, the LTCG tax is proposed to be levied at 12.5% without indexation benefits, compared to the existing 20% rate with indexation, while the STCG rate remains unchanged.
