New Delhi: In her Union Budget 2024-25 announcement, Finance Minister Nirmala Sitharaman has raised the tax rate on long-term capital gains (LTCG) from 10 per cent to 12.5 per cent. The exemption limit for these gains is now set at ₹1.25 lakh per year. This change impacts both financial and non-financial assets, aiming to increase government revenue from capital gains taxation.A hike on Short-Term Capital Gains toShort-term capital gains (STCG) have also seen a significant hike. The tax rate on these gains, specifically from certain financial assets, has been increased from 15 per cent to 20 per cent. This adjustment reflects the governments focus on increasing tax revenues from trading activities.Securities Transaction Tax (STT)Among other notable changes, the Finance Minister announced a significant increase in the Securities Transaction Tax (STT), which will rise from 0.01 per cent to 0.02 per cent. This hike effectively doubles the tax burden on equity and index traders involved in Futures and Options (F&O) transactions.How did the market reactThe equity benchmark indices reacted negatively to these announcements, with a noticeable decline following the hike in long-term capital gains tax. Investors and market participants expressed concerns over the increased tax burden, which could impact trading activities and investment strategies.Economic outlook and prioritiesPresenting the budget, Sitharaman emphasised Indias robust economic growth amidst global uncertainties. “Indias economic growth continues to be the shining exception and will remain so in the years ahead,” she stated. Despite global economic challenges, she highlighted Indias resilience and outlined nine priorities for the coming years: productivity and resilience in agriculture, employment and skilling, inclusive human resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation and R&D, and next-generation reforms. These priorities aim to boost job creation and stimulate consumption, particularly benefiting consumer goods, real estate, and the auto sectors.
