Budget 2024: How tax changes impact investors
Budget, presented by Finance Minister Nirmala Sitharaman, introduces significant changes to the taxation of capital assets and capital gains. These amendments aim to rationalize capital gains tax provisions and bring parity across different asset classes and types of investors.
While the amendments are indeed welcome as they simplify the hitherto complicated capital gains tax provisions in India and largely bring listed and unlisted shares at par amongst resident and non-resident sellers.
The long-term capital gains on all financial and non-financial assets will now be taxed at a uniform rate of 12.5%. This means that the tax rate on listed shares has been increased by 2.5% while the tax rate on other assets including real estate is now reduced significantly from 20% to 12.5%.
Further, the holding period for all assets other than listed securities has been made uniform at 24 months for classification as long term. These changes, while seemingly simple, need to be looked at from a nuanced perspective.
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On one hand, resident shareholders and Indian promoters stand to gain significantly on sale of their unlisted businesses, even without cost indexation benefit being available, the foreign private equity investors and other FDI investors
