Budget 2024: Tax Rates On Both Short And Long Term Capital Gains Raised With Immediate Effect

Sitharaman announced that short-term capital gains on "specified" financial assets will henceforth attract a tax rate of 20 per cent instead of 15 per cent. While all other financial assets and non-financial assets shall continue to attract the "applicable tax rate".

New Delhi: Finance Minister Nirmala Sitharaman's Budget speech has announced to raise on long-term and short-term capital gains tax. All these proposals will come into force immediately.

Sitharaman announced that Short term gains on certain financial assets shall henceforth attract a tax rate of 20 per cent, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate.

As per definition, any profit or gain that arises from the sale of a 'capital asset' is a capital gain. Long term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent.

However, for benefit of the lower and middle-income classes, FM proposed to increase the limit of exemption of capital gains on certain financial assets to Rs 1.25 lakh per year, added the FM.

Listed financial assets held for more than a year is classified as long-term, while unlisted financial assets and all non-financial assets will have 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, however, will attract tax on capital gains at applicable rates," Sitharaman said in her Budget speech.

CA Arjun Tandon Partner, Kailasa Capital Advisors LLP commented that while the government has been encouraging stock market participation, these new taxes are going to place a heavier burden on investors. F&O traders, in particular, will feel the strain as they already face high transaction charges.

"This STT increase is expected to not only further reduce the profitability of derivatives traders but also potentially decrease overall trading volumes in the market. While the increased exemption limit for LTCG from ₹1 lakh to ₹1.25 lakh offers some relief, the overall tax burden on investors and traders is set to rise," Tandon added.