The Union Budget 2024 has introduced significant changes to the taxation of financial and non-financial assets, which are set to take effect on October 1, 2024. These changes will impact both long-term and short-term capital gains, as well as the securities transaction tax (STT) on futures and options.
Key Highlights:
- LTCG Tax Rate Increase: The long-term capital gains (LTCG) tax rate has been increased from 10% to 12.5% for all financial and non-financial assets. This change applies to gains from listed equity shares, equity mutual funds, and business trusts, among others. Additionally, the exemption limit for LTCG tax has been raised to ₹1.25 lakh per financial year, up from the previous limit of ₹1 lakh.
- STCG Tax Rate Increase: The short-term capital gains (STCG) tax on specified financial assets, including equity shares, equity mutual funds, and units of business trusts, has been increased from 15% to 20%. The holding period for determining STCG has been reduced to 12 months for listed securities (including units of listed business trusts) but remains at 24 months for all other assets.
- STT Rate Changes:
- Futures: The STT rate has been increased from 0.0125% to 0.02% of the price at which the futures are traded.
- Options: The STT rate has been raised from 0.0625% to 0.1% of the option premium.
- Removal of Indexation Benefits: The Budget also proposes the removal of indexation benefits for long-term capital gains on certain assets, notably real estate, gold, and other unlisted assets. The indexation benefit previously allowed taxpayers to adjust the purchase price of an asset for inflation when calculating capital gains. With its elimination, capital gains will now be calculated based solely on the actual purchase and sale prices without any inflation adjustment. These changes are effective from July 23, 2024.
These updates are part of the government’s broader efforts to streamline and enhance tax collection while ensuring a fair and equitable tax system. Investors and taxpayers are advised to review these changes carefully and consider their implications on their financial planning and investment strategies.
Stay informed with the latest updates on Union Budget 2024 and its impact on your finances
