Capital Gain On Share Market Income Increased: Budget 2024-25

On July 23, the Union Budget for 2024-25 was presented in the Lok Sabha by Finance Minister Nirmala Sitharaman.The Finance Minister has increased the capital gain on share market income, which may prove to be a major setback to the share market investors.The short-term capital gains tax (STCG) on certain assets would be twenty percent, while the long-term capital gains tax (LTCG) on all financial and non-financial assets would rise to twelve and a half percent from ten percent in the Union Budget for 2024–2025.The announcement by Finance Minister Nirmala Sitharaman to increase the STT rate from 0.01 percent to 0.02 percent dealt a serious blow to traders in Futures and Options (F&O). Equity and index traders will thus be required to pay twice as much in taxes for their trades following the implementation of the budget proposal.Securities Transaction Tax (STT) is a crucial element of the financial landscape in India. It is designed to regulate and generate revenue from the trading of securities and introduced to bring forth speculative trading and ensure a fair contribution to the economy from market participants.“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 fund and unit 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 low rate is flowing largely to high net worth individuals. Other short-term capital gains shall continue to be taxed at applicable rate,” the Finance Minister said.The rate of long-term capital gains under provisions of various sections of the Act is proposed to be 12.5% in respect of all category of assets. This rate earlier was 10% for STT paid listed equity shares, units of equity-oriented fund and business trust under section 112A and for other assets it was 20% with indexation under section 112. However, an exemption of gains upto 1.25 lakh (aggregate) is proposed for long-term capital gains under section 112A on STT paid equity shares, units of equity oriented fund and business trust, thus, increasing the previously available exemption which was upto 1 lakh of income from long term capital gains on such assets. For bonds and debentures, rate for taxation of long-term capital gains was 20% without indexation. For listed bonds and debentures, the rate shall be reduced to 12.5%. Unlisted debentures and unlisted bonds are of the nature of debt instruments and therefore any capital gains on them should be taxed at applicable rate, whether short-term or long-term. Thus, unlisted debentures and unlisted bonds are proposed to be brought to tax at applicable rates by including them under provisions of section 50AA of the Act. This amendment in section 50AA shall come into effect from the 23rd day of July, 2024.

Capital Gain On Share Market Income Increased: Budget 2024-25

Mariya Paliwala

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