Budget 2024: Government increases taxes on equity investments

Budget 2024: In a policy shift, the government has announced an increase in taxes on equity investments as part of the Union Budget for 2024-25. Finance Minister Nirmala Sitharaman, in her budget speech on Tuesday, outlined the changes, which include higher tax rates for both short-term and long-term equity investments.

The tax rate for equity investments held for less than one year has been raised from 15 per cent to 20 per cent. For shares held for more than 12 months, the long-term capital gains tax has been increased from 10 per cent to 12.5 per cent. These changes are aimed at generating additional revenue and simplifying the tax structure for capital gains.

Changes in Securities Transaction Tax (STT)

The government has also increased the Securities Transaction Tax (STT) on the futures and options segment to 0.02 per cent. This adjustment is expected to have an impact on the trading community and could affect market dynamics.

Finance Minister Nirmala Sitharaman clarified that capital gains taxation will be significantly simplified. Short-term gains on certain financial assets will now attract a tax rate of 20 per cent, while gains on other financial and non-financial assets will continue to attract the applicable tax rate. Long-term gains on all financial and non-financial assets will be taxed at 12.5 per cent.

For the benefit of the lower and middle-income classes, the limit of exemption of capital gains on certain financial assets has been increased to Rs 1.25 lakh per year. Listed financial assets held for more than a year will be classified as long-term, while unlisted financial assets and all non-financial assets will need to be held for at least two years to be classified as long-term.

Unlisted bonds and debentures, debt mutual funds, and market-linked debentures, irrespective of the holding period, will attract tax on capital gains at the applicable rates.

To deepen the tax base, the Finance Minister also proposed two additional measures: an increase in the Security Transactions Tax on futures and options of securities to 0.02 per cent and 0.1 per cent respectively, and the taxation of income received on the buyback of shares in the hands of the recipient.


(Source: Republicbiz)