Budget 2024: From capital gains tax rates to securities transaction hike, key changes market participants need to know

In her historic seventh back-to-back Budget presentation, Finance Minister Nirmala Sitharaman on July 23 announced a number of changes applicable to market participants, including an increase in the securities transaction tax (STT) on derivatives - also known as futures and options (F&O) - trades.

During her much-anticipated Budget speech, the finance minister "proposed to increase the rates of STT on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded". Read full text of Budget speech

She also announced a 250 bps increase in the long-term capital gains (LTCG) tax applicable to financial as well as non-financial assets to 12.5 per cent while proposing a 20 per cent short-term capital gains (STCG) tax on select financial assets. In some relief to the investor, however, the Budget proposed an increased limit for the exemption of capital gains on select financial assets to Rs 1.25 lakh per financial year, instead of the current Rs 1 lakh.

Revenue Secretary Sanjay Malhotra said that the proposed changes in capital gains tax rates are estimated to garner an additional Rs 15,000 crore for the exchequer. 

STT Hike

The finance minister announced a hike in the STT applicable to the sale of an option securities contract from 0.0625 per cent to 0.1 per cent of the option premium, and that of a futures securities contract from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded. 

Share Buyback 

As per the Budget 2024, the income from share buybacks by companies will be chargeable as dividend in the hands of the recipient investor. This is in contrast to the current practice, wherein such corporates pay additional income tax. The cost of such shares will be treated as a capital loss to the investor. 

The STT and buyback moves are aimed at "widening and deepening of the tax base and anti-avoidance", according to the Budget documents.