Budget 2024: Experts decode capital gains tax changes and their likely impact

Indian equities in intra-day lost up to a sharp 1,277 points on the Sensex as the sentiment soon turned negative on the D-Street after the FM tinkered with the capital gains tax and also made various other moves that could impact investor returns.

Here’s what has been announced for investors in Budget 2024

The scope of LTCG tax application has now been extended and henceforth the LTCG will apply to gains over Rs 1.25 lakh in a year. Limit of exemption of capital gains has been increased to Rs 1.25 Lakh per year to benefit lower and middle-income classes. Listed financial assets held for more than a year and unlisted assets (financial and non-financial) held for more than two years to be classified as long term assets,  noted the PIB Budget release. It added Long term gains on all financial and non-financial assets to attract 12.5 per cent rate. 

Further, short term gains on certain assets will be charged at the rate of 20 per cent.

In the F&O segment, the FM tinkered with the securities transaction tax. "It is 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," she said. 

Experts view on this rate tinkering in the equity segment

Palka Arora Chopra, Director, Master Capital Services stated that the 25 per cent increase in the long-term capital gains (LTCG) tax is manageable and not likely to deter investors significantly. However, the increase in Short-Term Capital Gains (STCG) tax from 15 per cent  to 20 per cent could have a more pronounced negative impact in the medium term.

Another expert told Zee Business that these decision on the capital gains tax front were taken in haste and there wasn’t any immediate need for these and the centre could have waited for them going forward.

Sarvjeet Singh Virk, Co-founder & MD, Shoonya by Finvasia on said the rationalization of the capital gains tax regime promises a simpler and more navigable landscape for investors, promoting greater participation. The increased exemption limit for long-term capital gains on listed securities is a boon for smaller players, encouraging them to invest and contribute to market growth.