Finance Minister Nirmala Sitharaman has announced changes in capital gains taxes during her 7th consecutive Budget presentation at Lok Sabha on Tuesday.
Investors will have to allocate a greater chunk for taxes with the government increasing both short and long term taxes on capital gains.
“Capital gains taxation is also proposed to be hugely simplified,” Finance Minister Nirmala Sitharaman stated.
A hike has been announced in the limit capital gains exemption limit to Rs 1.25 lakh per year.
The short term capital gains (STCG) tax on some financial assets has been increased from 15 per cent to 20 per cent while the long term capital gains (LTCG) tax will rise from 10 per cent to 12.5 per cent.
“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. Long term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent. For the benefit of the lower and middle-income classes, I propose to increase the limit of exemption of capital gains on certain financial assets to ₹ 1.25 lakh per year,” she further said.
Presenting the Budget, she also announced a hike in STT (securities transaction tax) on F&O (futures and options) securities by 0.02 per cent and 0.1 per cent in order to discourage retail investors from trading in the risky market segment.
Unlisted bonds and debt MFs will continue to be taxed at applicable tax rate.
Following the Budget announcement, Indian equities witnessed a maior slump, the sensex was down almost 1,000 points today.
“From the markets perspective the raising of STCG to 20% and LTCG to 12.5% is a body blow. We need to brace ourselves for a negative reaction in the short term. In the light of all the concerns raised about the hyper active interest in the F&O segment it is not surprising that the STT on F&O has been raised 5 times from 0.02% to 0.1%. Hopefully this will moderate the frenzy in this space. On the positive side, the relief in Income Tax by way of raising the exemption limit to Rs 3 lakhs and standard deduction to Rs 75,000 is very welcome. This will put an incremental Rs 17,500 in the hands of a salary payer and support the consumption led growth in the economy,” said Sanjay Sinha, Founder, Citrus Advisors.
(This is a developing story, more details will be added.)
