The much-anticipated Budget 2024 India has brought a wave of significant tax changes for stock market investors, leaving Dalal Street buzzing with reactions.
Finance Minister Nirmala Sitharaman has introduced bold proposals, from doubling the Securities Transaction Tax (STT) to increasing both Short-Term and Long-Term Capital Gains taxes.
As these new rules take effect, investors must navigate a transformed financial landscape, making it crucial to understand the impactful changes that could reshape their investment strategies.
Following Finance Minister Nirmala Sitharaman’s announcement at Budget 2024 India of tax proposals for stock market investors in the 2024 Budget, Dalal Street experienced significant selling pressure, causing the market to drop from its intraday high.
Stock market experts noted that the Finance Minister doubled the Securities Transaction Tax (STT) on equity and index trades, increased the Long-Term Capital Gain (LTCG) Tax from 10% to 12.5%, and raised the Short-Term Capital Gain (STCG) Tax from 15% to 20%.
Here are the top 5 key changes announced by Finance Minister Nirmala Sitharaman in Budget 2024:
STT Rate on Derivative Trades
The Finance Minister has increased the Securities Transaction Tax (STT) rate for equity and index trades from 0.01% to 0.02%. She stated, “I have a couple of proposals for deepening the tax base. First, the Securities Transaction Tax on futures and options of securities is proposed to be increased to 0.02% and 0.1%, respectively.”
Increase in STCG Tax
The Finance Minister has increased the Short-Term Capital Gains (STCG) Tax from 15% to 20%. She announced, “Short-term gains on certain financial assets will now be taxed at a rate of 20%, while gains on all other financial assets and non-financial assets will continue to be taxed at the existing rates.”
Change in Long-Term Capital Gains (LTCG) Tax
Finance Minister Nirmala Sitharaman has increased the LTCG Tax from 10% to 12.5%. She stated, “Long-term gains on all financial and non-financial assets will now be taxed at a rate of 12.5%.”
Classification of Listed vs. Non-Listed Assets
Nirmala Sitharaman has extended the time period for classifying non-listed assets from one year to two years. Listed assets, including equities, remain unaffected by this change.
Tax Rule Change on Share Buybacks
Nirmala Sitharaman announced, “I propose to tax income received on the buyback of shares in the hands of the recipient,” during her Budget 2024 speech. Currently, shareholders are exempt from paying income tax on income from share buybacks.
Conclusion
The Budget 2024 introduced by Finance Minister Nirmala Sitharaman brings significant changes to the tax landscape for stock market investors. Key measures include a doubling of the Securities Transaction Tax (STT) on equity and index trades, increased rates for both Short-Term and Long-Term Capital Gains taxes, and new tax rules on share buybacks.
Additionally, the period for classifying non-listed assets has been extended. These changes are aimed at deepening the tax base but may impact investor sentiment and market dynamics. Investors should carefully consider these new tax rules when planning their investment strategies.
