The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, introduces significant changes in taxes that will impact various segments of the public. The overhaul of capital gains tax means short-term gains on financial assets will be uniformly taxed at 20%, affecting traders who rely on quick turnovers.
Long-term capital gains tax is reduced to 12.5%, which is favorable for long-term investors and offers an annual exemption of ₹1.25 lakh on profits, benefiting smaller investors. The removal of indexation for property, gold, and unlisted shares will increase tax liabilities, possibly deterring investments in these assets.
Additionally, reducing the holding period for bonds, debentures, and gold from 36 to 24 months will make these investments more appealing. An increase in the standard deduction from ₹50,000 to ₹75,000 will provide relief to salaried individuals, boosting their disposable income. Enhanced family pension deductions and the abolition of angel tax will support pensioners and start-ups respectively.
However, the increase in Securities Transaction Tax (STT) on futures and options to 0.2% might reduce trading volumes. Lastly, treating buybacks as dividends simplifies the tax process, potentially reducing tax evasion. These reforms aim to balance simplification and growth, fostering a stable and investor-friendly environment.
Manoj Jajoo
Chartered Accountant
M Jajoo & Co.
Budget 2024 meets the government commitment for making a more Viksit Bharat by focusing expenditure towards increasing inclusivity, employment, agricultural and MSMEs. On the direct taxes front, there is a long due review proposed of the Income-tax Act. Steps towards rationalisation of the TDS regime is a welcome measure.
A huge impact on the Capital Gains regime emanates from the removal of indexation for the purposes of computing cost while calculating gains. This will result in an extremely harsh tax cost especially on sale of old assets including ancestral assets. The shifting of buyback tax to individuals may have a mixed impact as it will now be taxed as dividend in the hands of recipient.
The removal of Angel Tax makes it a more conducive climate for start-ups to raise funds at any valuation above the FEMA floor price without any tax implication which can boost their price negotiations. The reduction in income-tax rates for foreign companies from 40% to 35% combined with easing of FDI norms is a step in the right direction to increase the FDI inflows in India.
![article-image](https://media.assettype.com/freepressjournal/2024-07/15bf1e1c-d28d-4fd8-aff5-57d587cc6df5/Untitled design - 2024-07-23T102537.652.jpg)
This proposal reduces the disparity in taxation of foreign companies vis-à-vis domestic companies. Altogether, it’s a very exciting budget from the taxation perspective.
Riaz Thingna, Chartered Accountant
Partner, Grant Thornton