Budget 2024: LTCG has gone up or down? Finance Minister Nirmala Sitharaman says this…

Finance Minister Nirmala Sitharaman has raised taxes on capital gains from equity investments. As per the Budget 2024 announcements, the government plans to levy a 20% tax on financial assets held for less than 12 months, up from 15%. It also increased the tax on long-term capital gains to 12.5% from 10% on all financial and non-financial assets.

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In a post-budget press conference on the 12.5% tax on long-term capital gains, Union Finance Minister Nirmala Sitharaman said, "...We wanted to simplify the approach to taxation - also for the capital gains. Second, if anything, the average taxation has come down when we say it is 12.5%. We have worked out for each of the different asset classes...The point that we brought it down from below the average to 12.5% encourages market investment..."

She added that earlier, it was 20% with indexation; now, it's 12.5% with indexation.

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On capital gains tax in the new tax regime, Rajarshi Dasgupta, Executive Director, AQUILAW, says, "The Long Term Capital Gains (LTCG) tax will rise from 10% to 12.5%, and the Short Term Capital Gains (STCG) tax on certain assets will increase from 15% to 20%. Short-term gains on certain financial assets shall henceforth attract a tax rate of 20%, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate. The exemption limit of capital gains on certain financial assets has been increased to ₹1.25 lakh annually. In addition, Sitharaman also announced a hike in STT (securities transaction tax) on F&O (futures and options) securities by 0.02% and 0.1% to discourage retail investors from trading in the risky market segment.

The widening gap between STCG and LTCG rates clearly encourages longer-term holdings, which aligns with our view of creating sustainable wealth. This move is also a step towards standardising taxation across various asset classes, potentially simplifying the investment decision-making process for many," he added.