In a massive relief to those holding legacy, long-time investments in <keyword id="19895040" type="General" weightage="20" keywordseo="Real-Estate" source="keywords">real estate</keyword>, the government today moved an amendment, offering them a choice between the old and new methods of calculating long-term capital gains (<keyword id="6357448" type="General" weightage="20" keywordseo="LTCG" source="Orion">LTCG</keyword>) and paying whichever is the lower of the two as tax. <br /><br />Amidst representations from the real estate sector, and concerns that removing indexation benefits would lead to a surge in black money inflows in the segment, the government proposed the aforementioned changes. Last month, while presenting the Union Budget 2024 on July 23rd, 2024, <keyword id="6355261" type="General" weightage="20" keywordseo="Finance-Minister" source="Orion">finance minister</keyword> <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> had announced doing away with indexation benefit for all asset classes like real estate, gold and more. To soothe the blow, the FM had also lowered the LTCG from its previous rate of 20% to 12.5%. <br /><h2><br />What was the condition before?</h2>Prior to Union Budget 2024, real estate investments would qualify for LTCG tax, provided they were held for more than 2 years, or 24 months. The LTCG tax payable would be 20%, along with indexation benefit. As the government noted in the <keyword id="123776" type="General" weightage="20" keywordseo="Finance-Bill" source="Orion">finance bill</keyword>, "<em>indexation available under the second proviso to section 48 is proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold, and other unlisted assets. This will ease the computation of capital gains for the taxpayer and the tax administration"</em>. <br /><br />Indexation allowed investors to factor in the impact of inflation on their investment over the years, thereby increasing the cost of acquisition, which reduced their capital gains and thus, lowered their overall LTCG tax liability. Here, the government considered the indexed cost of acquisition, rather than the original cost of acquisition, for calculating LTCG. <br /><br />Consider this: Manya purchased a property in FY 2002-03 for Rs 30,00,000. In June 2024 (FY24-25), she decided to sell it for Rs 80,00,000.<br /><br />Now, under the new <keyword id="22692992" type="General" weightage="100" keywordseo="LTCG-Regime" source="keywords">LTCG regime</keyword> (12.5% sans indexation benefit), her tax liability would come down to Rs 6,25,000 (12.5% of 50,00,000).<br /><br />But if she opted for indexation benefits, her indexed cost of acquisition would be calculated using this formula: <br /><strong><em>Cost Inflation Index (CII)value for transfer/sale year/CII for purchase year, or 2001-02 (whichever is later) X cost of acquisition] = </em></strong>363/105 X 30,00,000= Rs 1,03,71,428 (around Rs 1 crore)<br /><br /><em>(CII values are issued by the government)<br /></em><br />This is the cost Manya would have to pay, if she were to buy the same property today. But since she sold her house for Rs 80,00,000, she incurred a capital loss of around Rs 20,00,000 and hence, would not have to pay any LTCG tax.<br /><br /> Another change that budget announced was that all properties that were purchased prior to 2001 would be grandfathered. This meant that indexation benefits would be applicable to properties which had been purchased prior to 2001. <br /><br /><h2>What changes now? <br /></h2>There are two major changes: <br /><br />1. Going ahead, investors will have the choice to avail either of the two LTCG regimes-either pay tax on a lower rate of 12.5% (minus indexation), or pay LTCG at the rate of 20%, along with indexation benefit. They will have the freedom to pay taxes per whichever regime which reduces their tax liability. <br /><br />2. The grandfathering clause, which was earlier set at 2001, will now be considered at 23rd July, 2024. This means that for any property (land or building) that was transferred or sold before July 23rd, 2024, taxpayers will have the option to choose between either of the LTCG regimes, and pay the lower of the two as tax. <br /><br />However, any property that has been sold after July 23rd, 2024 will continue to be taxable exclusively under the new LTCG regime i.e. taxable at 12.5% minus the benefit of indexation. The time period proposed in the budget for an asset to qualify as a <keyword id="22692993" type="General" weightage="20" keywordseo="Long-term-Capital-Asset" source="keywords">long-term capital asset</keyword> i.e. 36 months would also continue to apply.<br /><br />This benefit will only be applicable to real estate i.e. <keyword id="460692" type="General" weightage="20" keywordseo="Immovable-property" source="Orion">immovable property</keyword>. Transfer/sale of other assets such as gold will continue to attract 12.5% LTCG sans indexation benefits. <br />

Govt. offers relief on long-term capital gains for real estate, allows investors to choose between old and new LTCG regime

<keyword id="20698525" type="General" weightage="20" keywordseo="Realty-stocks" source="keywords">Realty stocks</keyword> were in the limelight during trade on Wednesday, with <keyword id="19949512" type="General" weightage="20" keywordseo="Godrej-Properties" source="keywords" meta.keywordsubtype="org" meta.entityname="Godrej Properties" meta.hostid="261" meta.entityid="Godrej Properties">Godrej Properties</keyword> surging over 4%, a day after the government proposed significant relief for individuals who bought houses before July 23, 2024, by giving them the option to choose between two <keyword id="20452955" type="General" weightage="20" keywordseo="tax-rates" source="keywords">tax rates</keyword> for <keyword id="20584761" type="General" weightage="100" keywordseo="long-term-capital-gains" source="keywords">long-term capital gains</keyword> (LTCG) tax. <br /><br /> Shares of Godrej Properties surged 4.12 %, Macrotech Developers rallied 4 %, DLF climbed 3.88 %, Oberoi Realty jumped 3.79 % and Mahindra Lifespace Developers advanced 1.82 % on the BSE. The BSE realty index quoted 1.72 % higher at 7,953.46 during the morning trade. <br /><br /> The Budget 2024-25 had proposed to lower the LTCG from 20 % to 12.5 % but removed the <keyword id="21006654" type="General" weightage="20" keywordseo="indexation-benefits" source="keywords">indexation benefits</keyword>. The new rates have come into effect from July 23, 2024. The indexation benefit allowed taxpayers to compute gains arising out of the sale of capital assets after adjusting for inflation. <br /><br /> Tax experts had said that the proposed changes in the Budget would raise the <keyword id="22480102" type="General" weightage="20" keywordseo="LTCG-tax" source="keywords">LTCG tax</keyword> burden. <br /><br /> As per the amendments to Finance Bill, 2024, circulated to the Lok Sabha members on Tuesday, individuals or HuF (Hindu Undivided Family) who bought houses before July 23, 2024, can compute his/her taxes under the new scheme [@12.5 % without indexation] and old scheme [@20 % with indexation] and pay such tax which is lower of the two. <br /><br /> Gouri Puri, Partner, Shardul Amarchand Mangaldas &amp; Co. said, this will quell taxpayer concerns around losing indexation benefits as a trade-off for a lower long-term capital gains tax rate. <br /><br /> "Taxpayers can choose the more beneficial regime, and should not be worse off because of change in law. Concerns around taxation of inflationary gains in respect of immovable property acquired prior to a change in the law have been addressed," Puri added. <br /><br /> In the <keyword id="19911354" type="General" weightage="20" keywordseo="equity-market" source="keywords">equity market</keyword>, the 30-share <keyword id="19950208" type="General" weightage="20" keywordseo="BSE-Sensex" source="keywords">BSE Sensex</keyword> jumped 1,046.13 points to 79,639.20 in early trade. The NSE Nifty surged 345.15 points to 24,337.70.

Realty stocks in limelight; Godrej Properties surges over 4%

The <keyword id="20449324" type="General" weightage="20" keywordseo="Finance-Bill" source="keywords">Finance Bill</keyword> 2024 was passed by <keyword id="19895394" type="General" weightage="20" keywordseo="Lok-Sabha" source="keywords" meta.keywordsubtype="org" meta.entityname="Lok Sabha" meta.hostid="261" meta.entityid="Lok Sabha">Lok Sabha</keyword> on Wednesday evening, with a few amendments moved by the government. Replying to the debate, Finance Minister Nirmala Sitharman said the approach of the government has been to bring greater simplification of <keyword id="19987671" type="General" weightage="20" keywordseo="tax" source="keywords">tax</keyword> laws and procedures and enable growth and employment in the country. She responded to points made by members.<br /><br />The Finance Minister clarified that in real estate, the roll over provisions have not been withdrawn and are applicable. She said if the capital gain in a property transaction is invested in buying another one or two properties up to a maximum value of Rs 10 crore, no capital gain tax is required to be paid on such profits.<br /><br /><keyword id="20619608" type="General" weightage="20" keywordseo="capital-gains" source="keywords">Capital gains</keyword> can also still be invested in bonds which are notified under Section 54 of the Income Tax Act up to a maximum of Rs 50 lakh annually and save on taxes. To give relief on budget proposals, Sitharaman also moved an amendment in the Finance Bill on the changes in the capital gains tax on <keyword id="20412285" type="General" weightage="20" keywordseo="property-transactions" source="keywords">property transactions</keyword>.<br /><br />The amendment implies that taxpayers can avail either a lower tax of 12.5% without indexation or a rate of 20% with indexation, if the property is acquired prior to July 23, 2024, the day union budget was presented in the Lok Sabha.<br /><br />Sitharaman clarified that taxpayers can compute taxes under both provisions and choose to pay tax under the scheme where lower tax is applied. Effectively, July 23, 2024, is now set as the cut-off date for the calculation of the capital gains versus the earlier cut-off of 2001.<br /><br />Sitharaman said she has proposed these amendments as some members have raised hypothetical calculation to prove that under new provisions taxpayers will have to pay higher taxes. The new tax proposals on capital gains tax was brought in to bring in parity among different asset classes like equities, mutual funds and real estate.<br /><br />In the Finance Bill introduced on July 23, the Finance Minister had proposed a flat long term capital gains tax of 12.5% with no <keyword id="943856" type="General" weightage="100" keywordseo="indexation-benefit" source="Orion">indexation benefit</keyword>s, prior to it property transactions used to be taxed at 20% with indexation benefit. The minister also clarified that the grandfathering proposal will be allowed only for individual and Hindu Undivided Family (HUF) taxpayers and not for companies and Non Resident Individuals. They have to pay flat 12.5% LTCG tax without indexation.<br /><br />The proposed amendment will apply not only on real estate transactions, but also on unlisted equity transactions, which are done before July 23, 2024. All such transactions will be taxed at 10%  long term capital gains instead of FY24-25 budget provision of 12.5% tax. <br /><br />With the opposition members demanding removal of <keyword id="19951327" type="General" weightage="20" keywordseo="GST" source="keywords">GST</keyword> on health insurance, Sitharaman said tax was there on medical insurance even before GST was introduced.<br /><br />"There was already a Service Tax on medical insurance, before the GST was introduced. This is not a new tax, it was already there in all the states. Those protesting here, did they discuss regarding the removal of this tax in their states? Did they write to the Finance Ministers of their respective states about it and asked them to raise it in the GST Council where states have 2/3rd part? No, but they are protesting here. This is their double standards, this is their drama," she said.<br /><br /> "Wrongful protests have happened recently, and comments have been passed on the basis of a news report which suggested that the 'Centre has pocketed Rs. 24,529 crores of health insurance premiums alone'. This is incorrect and highly misleading. The GST rate of 18% on health insurance comprises of 9% CGST and 9% SGST. Thus, of the total collections of Rs 24,529 crores from health insurance in the last 3 years, Half of it, Rs. 12,264 crores, went straight to the states as SGST. It doesn't even come to the Centre," she added.<br /><br />The minister said that apart from this, roughly 41%of the Centre's share of GST collection on health insurance is devolved back to the states again, as part of Tax Devolution as per the Finance Commission's formula.<br /><br />Sitharaman said the new income tax regime is simpler and offers lower income tax rates for individuals.<br /><br />"It gives flexibility to the taxpayer to see where he wants to put his money in the absence of exemptions which is available in the old income tax regime. The old regime has not been dissolved and is still an alternative to the new tax regime. It still offers benefits of various deductions such as interest on home loan, etc. Individuals without business income can choose between regimes once and can revert back too. Hence, a choice has been provided to assesse," she said.<br /><br />For the previous Assessment Year 2023-24 till December 31, 2023, about 3.8% of taxpayers opted for the new tax regime, which equates to 30.93 lakh individuals, from a total of 7.98 crore ITRs filed in the categories of ITR-1 to ITR-4, she said. <br /><br />"However, for the Assessment Year 2024-25 until July 31, 2024, there was a dramatic increase in adoption of the new regime, with approximately 72.8% of taxpayers choosing the new tax regime. This represents about 5.25 crore individuals, out of a total of 7.22 crore ITRs filed in the same category."<br /><br />Sitharaman said this shows a substantial shift in taxpayer preference towards the new tax regime, over the span of just one year.<br /><br />"Taxpayers opting for the new regime does not mean savings and investments are not happening in the economy by the middle-class. Due to growth in fintech, better awareness, and ease of investment due to UPI, e-KYC, progressive regulations, investments in mutual funds have increased tremendously. On an average, 17.88 lakh new folios have been added every month in the last 5 years since June 2019. The number of unique mutual fund investors has grown from under 1 crore in 2014 to about 4 crore today," she added.<br /><br />The Finance (No.2) Bill, 2024 was passed after amendments moved by opposition were negatived.<br /><br />Sitharaman said the vision of Prime Minister Narendra Modi has been to establish a simple, efficient and fair technology-driven taxation regime in the country.<br /><br />"So, simplification and ease of compliance for the taxpayer has been the primary objective. In the last 10 years, and this year, in the third term of PM Modi, the approach to taxation has been to simplify it, reduce the burden on taxpayer and make sure it is transparent and equitable," she said.<br /><br />"This year also, our approach has been that we bring in greater simplification of tax laws and procedures, and that we enable growth and employment in this country," she added. Sitharaman presented the Union Budget in Parliament on July 23.<br /><br />This is the first full budget of the NDA government led by PM Modi. The BJP-led alliance won a third successive term earlier this year. The Lok Sabha took up discussion on the Finance Bill after the Appropriation Bill for the central government's expenditure for 2024-25 was passed by the House on Monday.<br /><br />The Finance Bill will now be discussed by Rajya Sabha. The passage of bill will complete the budget process.<br /><br />

Lok Sabha passes Finance Bill, provision on LTCG tax on property transactions amended

<br /><ul><li>LTCG of up to Rs 1,20,000 in a single financial year is tax-free. </li><li>Effective July 23rd, 2024, <keyword id="21006654" type="General" weightage="100" keywordseo="indexation-benefits" source="keywords">indexation benefits</keyword> will no longer be available for real estate, gold</li><li>Effective July 23rd, LTCG will be charges at 12.5%, sans indexation benefit</li></ul><br />After FM <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> proposed to remove indexation benefits on <keyword id="20584761" type="General" weightage="20" keywordseo="long-term-capital-gains" source="keywords">long-term capital gains</keyword> (LTCG) on real estate, gold, and other unlisted assets, discussions were abuzz on the internet as to how this would lead to significantly higher <keyword id="20118944" type="General" weightage="20" keywordseo="taxation" source="keywords">taxation</keyword> on gains from <keyword id="20008581" type="General" weightage="20" keywordseo="property-sales" source="keywords">property sales</keyword>. Previously, LTCG on long-term capital gains was marked at 20%, but it came with indexation benefits, which eventually lowered the individual's overall <keyword id="19974193" type="General" weightage="20" keywordseo="tax-liability" source="keywords">tax liability</keyword>. Now, it has been lowered to 12.5%, but minus any indexation benefit.<br /><br />So, with indexation gone, how will gains from property sales be taxed going ahead? Is this applicable to all properties? What is set to change? Does it help that the <keyword id="22480102" type="General" weightage="20" keywordseo="LTCG-tax" source="keywords">LTCG tax</keyword> has been brought down from 20% to 12.5%? Lets take a deep-dive<br /><br /><strong>Firs</strong><strong>t, explain this long term short-term conundrum to me</strong><br />So, how much capital gains tax you're supposed to pay depends on how long you hold a particular asset before selling it. Prior to yesterday's announcement, there were 3 holding periods which determined whether an asset was held for long-term or short-term:<br /><strong><u><br />The situation before-</u></strong><br /><ul><li>Shares, units of mutual funds would qualify for LTCG tax, if they are held for more than 12 months. If the holding period is less than 1 year, you'd have to pay short-term capital gains (STCG).</li><li>Real estate and immovable property would qualify for LTCG tax, if held for more than 24 months (2 years), along with indexation benefit.<br /><br /> </li><li>Bonds, debentures and gold were to be considered long-term capital assets, if they were held for more than 36 months (3 years), with indexation benefit. </li></ul>But going ahead, there will only be two waiting periods which will determine whether an asset would be classified as long-term or short-term <br /><br /><strong><u>The situation now-</u></strong><br /><ul><li>For all listed securities (stocks, mutual fund units), the holding period for LTCG tax purposes would be more than 1 year (sans indexation benefits)<br /><br />All other assets (real estate, gold, bond, debentures) will qualify for LTCG tax, if they are held for more than 24 months (minus indexation benefits). </li></ul><strong>What was the taxation situation earlier on long-term capital gains? </strong><strong>What has changed? </strong><br />So, lets say Tara purchased a property in FY 2004-05 for Rs 20,00,000. In  FY 2024-25, she decided to sell it for Rs 60,00,000. You'd think she'll have to pay a flat 20% on Rs 40,00,000, which was her total profit earned from selling her property (Rs 60,00,000-20,00,000). But this is where indexation swooped in and helped cushion the overall tax liability. <br /><br />Prior to July 23rd, 2024, the government considered something known as "indexed cost of acquisition" for determining an individuals' total LTCG tax liability, which was calculated using the following formula: <br /><br /><strong><em>[Cost Inflation Index (CII)value for transfer/sale year/CII for purchase year, or 2001-02 (whichever is later) X cost of acquisition].  </em></strong><br /><br />Thankfully, you don't have to go about calculating this CII value, since the government does this for you, and notifies the same officially. What CII essentially does is that it compares the current prices of basket A(which contains a bunch of products and services) to the price of the same basket A in the year of comparison, to reflect the change in prices caused by inflation. <br /><br />So, for Tara, her indexed cost of acquisition would come down to Rs 64,24,778 [363(CII for 2024-25) /113(CII for 2004-05)X 20,00,000]. This would mean she incurred a capital loss of Rs 4,24,778, since her indexed cost of acquisition is more than her sales receipts. So, she does not need to pay any LTCG tax. She can set off this loss, but only against her other long term gains with a limit of Rs 2 lakh in one financial year, and can carry forward the same for a maximum of 8 years.<br /><br />However, this changed when the budget memorandum noted yesterday, "<em>indexation available under the second proviso to section 48 is proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold, and other unlisted assets. This will ease the computation of capital gains for the taxpayer and the tax administration". <br /></em><br />This means that indexation benefits on LTCG will be applicable starting July 23rd, 2024. To understand its impact, assume that this rule is in effect from April 1, 2024. In that case, Tara's LTCG will be a flat 12.5% of her total gains of Rs  38,75,000 (remember, Rs 1,25,000 per year on LTCG are tax-exempt). This would bring Tara's taxability to Rs 4,84,375<br /><br /><strong>Long story, short, minus the indexation benefit, Tara will have to pay Rs 4,84,375 as long-term capital gains tax. </strong><br /><br />However, there has been a slight increase in the basic tax exemption limit for LTCG. Previously, LTCG of up to Rs 1,00,000 in a single financial year was tax-free. But now, this threshold has been raised to Rs 1,25,000. Small wins! <br /><br />                <div type="Article" hostid="261" msid="111956035" title="Decoding capital gains taxes: What FM Nirmala took from your pocket, what she gave you in Budget 2024" mstype="2" mssubtype="0"></div><br /><strong>Okay, is there something that continues to be the same for long-term capital gains?</strong><br />Yes, roll-over benefits continue without change. This means you can re-invest the proceeds from sale of your old property into buying a new, residential one, in order to avoid capital gains tax. But that too, is not without its share of catches:<br /><br />You can reinvest these funds in either 54EC bonds, which have a maximum annual investment limit of Rs 50,00,000. Or, you can avail this exemption for a maximum of 2 residential houses, provided your capital gains are limited to Rs 2 crore. <br /><br />Also, if you've it purchased a property, or held from before 2001, you can continue to avail indexation benefits, thanks to something called a grandfathering clause. <br /><br /><strong>Does indexation or lower tax rates work better?</strong><br />There's no general rule here. But a cursory look indicates that high capital gains would be favorably taxed under these reduced tax rates, while lower returns and holding periods would find indexation to be a better option. <br /> <br />Says Pankaj Kumar, VP – Fundamental Research, Kotak Securities, "the Union Budget-FY25 has rationalized long-term capital gains tax on real estate transaction. It proposed to remove indexation benefits and reduce the long term capital gains tax rate from 20% to 12.5% with immediate effect (grandfathering for properties held before 2001). We find that the new capital gains tax structure for real estate favours investors, who have generated high IRRs, while investors with poor IRRs would be worse off in the new regime". <br /><br />"On the other hand, it is expected to have limited impact on end users who purchase homes for personal consumption. The budget has also talked about encouraging states to lower the stamp duty and consider lower duties for women buyers. Lowering of stamp duties would reduce the overall acquisition cost in high stamp duty states/markets like Gurgaon, Chennai, Mumbai and Kolkata", continued Kumar.<br /><br /> <br />

Budget 2024: How will long-term capital tax change your real-estate investments post-budget?

The <keyword id="19903456" type="General" weightage="20" keywordseo="Income-Tax-department" source="keywords">Income Tax department</keyword> on Wednesday said 'substantial <keyword id="20138064" type="General" weightage="100" keywordseo="tax-savings" source="keywords">tax savings</keyword>' are expected for a vast majority of taxpayers due to reduction in the <keyword id="22526761" type="General" weightage="20" keywordseo="long-term-capital-gains" source="keywords">long term capital gains</keyword> <keyword id="45031" type="General" weightage="20" keywordseo="tax" source="Orion">tax</keyword> (LTCG) rate in the <keyword id="19895040" type="General" weightage="20" keywordseo="real-estate" source="keywords">real estate</keyword> sector. The Budget has reduced tax rates on capital gains earned from sale of house properties held for long term, but has removed the <keyword id="22142879" type="General" weightage="20" keywordseo="indexation-benefit" source="keywords">indexation benefit</keyword> available to taxpayers. <br /><br /> The LTCG has been reduced from 20 per cent with indexation benefit to 12.5 per cent without indexation for the real estate sector. <br /><br /> The indexation benefit allowed taxpayers to compute gains arising out of sale of <keyword id="801267" type="General" weightage="20" keywordseo="capital-assets" source="Orion">capital assets</keyword> after adjusting inflation. <br /><br /> In a post on X, the income tax department said the nominal real estate returns are generally in the region of 12-16 per cent per annum, much higher than inflation. <br /><br /> "The indexation for inflation is in the region of 4-5 per cent, depending on the period of holding. Therefore, substantial tax savings are expected to a vast majority of such taxpayers," it said. <br /><br /> Giving a comparison of benefits based on the holding period of the real estate property, the I-T department said the new <keyword id="22422932" type="General" weightage="20" keywordseo="tax-rate" source="keywords">tax rate</keyword> without indexation is beneficial in most cases. <br /><br /> For property held for five years, the new regime is beneficial when property has appreciated 1.7 times or more, while for a property held for 10 years, it is beneficial when the value has increased 2.4 times or more. <br /><br /> For a property purchased in 2009-10, if value has increased to 4.9 times or more, it is beneficial, it said. <br /><br /> "From the above examples, it is clear that only where returns are low (less than about 9-11 per cent per annum) that the earlier tax rate is beneficial, but such low returns in real estate are unrealistic and rare," the I-T department said. <br /><br /> As per the changes brought in the 2024-25 Budget, the government has retained the indexation benefit for taxpayers on properties bought or inherited before 2001. The changes in the tax rate have been made effective from July 23, 2024.

Majority of taxpayers to have substantial tax savings due to reduction of long term capital gains on real estate: IT Dept

July's here, and as we inch closer to the budget, which is set to be presented around the latter half of July, there is much talk about how it will affect our pockets. <br /><br />Reports suggest the government is considering raising the <keyword id="20429578" type="General" weightage="20" keywordseo="standard-deduction" source="keywords">standard deduction</keyword> threshold from existing Rs 50,000 to Rs 1,00,000, amidst other things. The most common wish for a salaried employee is to reduce the income tax rates across all slabs, but at the moment, this seems unlikely. That aside, we decode the common man's wish list and what they look forward to in terms of <keyword id="22225988" type="General" weightage="20" keywordseo="income-taxes" source="keywords">income taxes</keyword> as the Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> drafts the budget.<br /><br /><h2>Wish 1: Raise the standard deduction to Rs 1 lakh</h2>A standard deduction is a fixed amount that you can deduct from your taxable income right away, to reduce your overall tax liability. You do not need to furnish any proofs for this amount. Currently, this stands at Rs 50,000, under both old and new tax regimes. Raising this threshold to Rs 1,00,000 will mean more disposable income in your hands. And as per the policy experts, this is the most likely change that we can expect under the new budget.<br /><br /><h2>Wish 2: Increase the <keyword id="20228341" type="General" weightage="20" keywordseo="basic-exemption-limit" source="keywords">basic exemption limit</keyword> in new tax regime</h2>As per EY's pre-budget expectation report, an increase in the basic exemption limit from the present Rs 3,00,000 to Rs 5,00,000 would immensely benefit the common man. Earlier, this limit was set at Rs 2,50,000. Note that unless you specifically opt for the old regime, the new tax regime is considered as your default choice starting 2023. If your annual income is equal to, or falls below this basic exemption limit, you do not have to pay any income tax. <br /><br /><h2>Wish 3: Increase tax-free limit of LTCG gains<br /></h2>At present, if you sell any equity mutual fund unit or share after more than 12 months of holding it, you'll have to pay a 10% long-term capital gains (LTCG) tax. However, within one financial year, long-term capital gains below Rs 1,00,000 are tax-exempt. As EY's report notes, raising this extant tax-free limit to Rs 2 lakh would be beneficial, especially in boosting long-term investing sentiment in the country. But will this come true? Only Nirmala Sitharaman knows! <br /><br /><h2>Wish 4: Consider some tier-2 cities as metros for HRA exemption </h2>Residents of Gurugram, Noida, Bengaluru, listen up! HRA, or House rent allowance is a crucial component of our salary, and hence, our tax planning as well. You can get HRA exemption on the lowest amount amidst these 3: <br />1. Actual HRA received<br />2. 50% of salary for metro cities (Delhi, Mumbai, Kolkata, Chennai)<br />3. 40% of salary for non-metro cities<br />4. Rent paid- 10% of salary<br /><br />But its no secret that residents of nearby cities like Noida, Gurugram, Faridabad, or rapidly developing urban hubs like Pune, Ahmedabad, Ghaziabad, Hyderabad, Bengaluru, Thane bear the brunt of sky-high residential rents that takes a huge toll on their monthly income. Yet, they cannot claim 50% of their salary for HRA exemption. Since these cities has been classified as a non-metro, residents can claim a maximum of 40% of their salary as exemption. In case rent exceeds Rs 1,00,000 annually, you are also required to furnish the PAN details of landlord, along with a formal rental agreement.<br /><br />Consider this. You live in Delhi, and have an annual income of Rs 10,00,000. For HRA purposes, you can claim exemption of up to Rs 5,00,000, since Delhi is considered a metro. But, if you live in Ghaziabad, or Noida, the limit available to you sharply falls down to Rs 4,00,000. This budget, as reports note, considering these cities as metros for tax purposes would provide some relief to the common man's pocket.<br /><br />Per a recent report by ANAROCK research, the top 7 cities in the country (Mumbai metropolitan region, Hyderabad, Bengaluru, Pune, Delhi NCR, Chennai and Kolkata) saw an average price rise between 13-39% on a yearly basis. In fact, it was Hyderabad recorded the highest yearly price rise in residential property last quarter, jumping by as much as 39%.<br /><br /><h2>Wish 5 : Enhance exemption limits under the old regime</h2>The list is endless, but so are our wishes! Experts are also suggesting an enhancement in the existing limit for deduction towards interest on housing loan for self-occupied house. From its present limit of Rs 2 lakh, it should be taken to Rs 3 lakh. Also, the Rs 2-lakh cap on set off of house property loss against other heads in the same year should be done away with. <br /><br />For senior citizens, there should also be greater clarity on how funds received from <keyword id="19919089" type="General" weightage="20" keywordseo="nps" source="keywords">NPS</keyword> (National Pension System) via the systematic lumpsum withdrawal plan should be taxed. <br /><br />Well, we can only hope some, if not all of these wishes come true when finance minister presents the union budget in the parliament this month. <br />

Budget 2024: Increase standard deduction, exemptions and more, an aam aadmi's wishlist

<ul><li>No changes, or announcements for the old tax regime</li><li>FMlowered the tax burden by increasing the standard deductions in the new regime </li><li>Tax slabs also revised under the new regime</li></ul> <keyword id="7706673" type="General" weightage="20" keywordseo="Finance-Minister-Nirmala-Sitharaman" source="Orion">Finance Minister Nirmala Sitharaman</keyword> presented the Union <keyword id="18656923" type="General" weightage="20" keywordseo="budget-2024-25" source="Orion">Budget 2024-25</keyword> in the parliament recently, unveiling the Narendra Modi-led government’s budget for the fiscal year 2024-25. While the government announced some changes to direct taxation, including revised tax slabs for the new tax regime, most experts called the budget lackluster. <br /><br /> Nitin Chaudhary, Founder of NC Financial Advisory Services highlights his disappointment, noting that this Budget has actually been not at all impactful as it was expected to be. <br /><br />"It is more of a Budget for Coalition rather than any common man and tax payer. Neither there was any major drastic change in allocation as such and nor there was any major relief and tax benefits that was passed on to the tax payer.<br />There is a slight change in the tax slab rate owing to which there will be a very limited benefit to the tax payer in terms of tax outflow", continued Chaudhary.<br /> <br /><h2>Changes in new tax regime</h2>In a bid to make the new tax regime more lucrative, the FM proposed to hike the standard deduction limit to Rs 75,000 from earlier Rs 50,000, exclusively under the new tax regime. Similarly, the deduction available for family pension is also proposed to be increased from Rs 15,000 to Rs 25,000.<br /><br />More than two-thirds of taxpayers have availed of the new <keyword id="6354751" type="General" weightage="20" keywordseo="income-tax" source="Orion">Income Tax</keyword> regime, as per <keyword id="129243" type="General" weightage="20" keywordseo="Nirmala-Sitharaman" source="Orion">Nirmala Sitharaman</keyword>. The FM announced a review of the comprehensive tax regime. Per FM, under the new regime, taxpayers will be able to save up to Rs 17,500 as taxes, annually.<br /><br />The government has revised the tax rate structure for the new regime, which are now as follows -<br /><br /><h2>New income tax slab rates</h2><br /><table style="border-width: initial; border-style: none;" class="redcator-table-advance"><colgroup></colgroup><col /><col /><tbody><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#000000;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Income slabs<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#000000;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Tax rate<br /><br /></td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#d9d9d9;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">0 to 3L<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#d9d9d9;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nil<br /><br /></td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3 to 7L<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">5%<br /><br /></td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#d9d9d9;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7 to 10L<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#d9d9d9;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10%<br /><br /></td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10 to 12L<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">15%<br /><br /></td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#d9d9d9;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">12 to 15L<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;background-color:#d9d9d9;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">20%<br /><br /></td></tr><tr><td style="border-left:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Above 15L<br /><br /></td><td style="border-right:solid #000000 0.5008695000000001pt;border-bottom:solid #000000 0.5008695000000001pt;border-top:solid #000000 0.5008695000000001pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30%<br /><br /></td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Prior to the changes announced today, the new tax regime was structured as follows:<br /><br /><h2><table class="redcator-table-advance" style="border-width: initial; border-style: none; background-color: rgb(255, 255, 255); font-size: 16px; line-height: 1.6em; box-shadow: none; width: 850.594px; font-family: Merriweather; letter-spacing: 0.121826px; padding-bottom: 10px !important; background-image: inherit !important; background-position: inherit !important; background-size: inherit !important; background-repeat: inherit !important; background-attachment: inherit !important; background-origin: inherit !important; background-clip: inherit !important;"><tbody><tr><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;">Income Slab (In Rs)</td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;">Tax Rate</td></tr><tr><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>Up to 3,00,000</strong></td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>No Tax</strong></td></tr><tr><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>3,00,001 - 6,00,000</strong></td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>5%</strong></td></tr><tr><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>6,00,001 - 9,00,000<br /></strong></td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>10% (Tax Rebate up to Rs 7 lakh)</strong></td></tr><tr><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>9,00,001 - 12,00,000</strong></td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>15%</strong></td></tr><tr><td class="se-table-selected-cell" style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>12,00,001 - 15,00,000<br /></strong></td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>20%<br /></strong></td></tr><tr><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>Above 15,00,000<br /></strong></td><td style="border-width: 1px; border-style: solid; border-color: rgb(221, 221, 221); padding: 5px; font-size: 16px; vertical-align: top;"><strong>30%</strong></td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table><br /></h2>Says T Manish, Research Analyst, SAMCO Securities, "FM announces revised tax rate under new tax regime, apart from the above slab revisions, the Standard deduction from 50,000 to 75,000 for individuals opting for new tax regime. This would result in savings of around Rs. 17500 in net taxes in the hands of individual. This would benefit directly to the companies in FMCG segment such as HUL, ITC, Dabur, Nestle and second order beneficiaries would be suppliers to these FMCG giants such as Polyplex, Uflex. Further, increased saving would also boost the inflow to wealth management (AMC’s)in the form of SIP's, and to Stock broking companies through brokerage".<br /><br /><h2>Capital gains simplified</h2>FM also moved to rationalise and simplify short-term capital gain (STCG) tax. Going ahead, STCG on specific financial assets will be charged at 20%, while the remaining financial and other non-financial assets will be charges as per applicable rates. This threshold was set at 15% previously.<br /><br />The long-term capital gains tax on financial and non financial assets was raised from its earlier threshold of 10% to 12.5%. However, the exemption limit under LTCG has been enhanced. This means that now, all long-term capital gains tax earned during the year to the tune of Rs 1,25,000 will be tax exempt. This limit was earlier set at Rs 1,00,000. Specified listed financial assets will be considered long-term provided they have been held for more than 12 months.<br /><br />As Anand Rathi, Co-founder of MIRA Money notes, the FM aims to send a clear message to the investors: avoid short term trading and leveraging. This is reflected in the increased security transaction taxes on futures and options,<br />which is a positive step. However, the increase in short term capital gains tax from 15% to 20% is a notable drawback for many traders.<br /><br />"Previously, if your capital gain was 2 lakh rupees, 1 lakh was exempted, and you had to pay 10% on the remaining 1 lakh, amounting to 10,000 rupees. Now, with the same 2 lakh rupees capital gain, you would pay<br />12.5% tax on the remaining 75,000 rupees after the exemption, which is beneficial", Rathi explained. <br /><br /><br />                        <div type="Article" hostid="261" msid="111946291" title="Union Budget 2024-25 key highlights: Angel tax to be scraped" mstype="2" mssubtype="0"></div><br /><h2>Higher tax on F&amp;O trading</h2>In a bid to stop fund inflows into speculative trading, the securities transaction tax (STT) on trading in futures and options was increased. While STT on options was increased from 0.062% to 0.1%, while the STT on futures was raised from 0.0125% to 0.02%. While this might seem as a  major setback to those trading in futures and options, experts opine that this is unlikely to significantly trading volumes in the segment. Note that this change is set to come into effect starting October 1, 2024. <br /><br />Says Deepak Ramaraju, Senior Fund Manager, Shriram AMC, "Hike in short-term capital gains and long-term capital gains have been sentimentally negative for the equity markets. This has resulted in short-term selling pressure. However, this can be the beginning of reforming the capital markets and curbing retail participation in the F&amp;O segment. We can expect more measures in the F&amp;O space in the days to come". <br /><br /><h2>Other tax changes</h2><ul><li>The TDS rate on e-commerce operators has been reduced from 1% to 0.1%</li><li>Angel tax, the tax levied on the capital raised via the issue of shares by unlisted companies has been abolished.</li><li>TDS payable on insurance commission reduced from 5% to 2%, starting 1st October, 2024.</li><li>TDS payable on rent paid over Rs 50,000 to be reduced from 5% to 2%. </li></ul><br /><strong>SEE ALSO:<br /></strong>        <br />          <div type="Article" hostid="261" msid="111953230" title="Union Budget 2024-25: Mobile Phones to get cheaper, as FM Nirmala Sitharaman reduces basic customs duty to 15%" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div>          <div type="Article" hostid="261" msid="111952160" title="Sitharaman announces cut in customs duty on gold, silver to 6%" mstype="2" mssubtype="0"><payload><![CDATA[seealso]]></payload></div><br />

Budget 2024-25: New tax regime sweetened by FM, hikes standard deduction to Rs 75,000

The union budget for 2024 introduced a slew of changes that will directly impact your pocket in the days to come. FM Sitharaman brought about significant changes in how your capital gains were taxed. Take a look at how this will impact your pocket. <br /><br /><strong>First off, what are capital gains? <br /></strong>Simply put, any gains or profits you make when you sell a capital asset like your properties, investments in stock or mutual funds and more is counted as capital gains. What sets capital assets aside is their ability to generate monetary value over a long period. Depending on the time period they are held for before they are sold, <keyword id="20584761" type="General" weightage="20" keywordseo="long-term-capital-gains" source="keywords">long-term capital gains</keyword> (LTCG) or <keyword id="20584760" type="General" weightage="20" keywordseo="short-term-capital-gains" source="keywords">short-term capital gains</keyword> (STCG) is applicable.<br /><br /><strong>So, what has changed? </strong><br />In one sharp move, <keyword id="19916618" type="General" weightage="20" keywordseo="Nirmala-Sitharaman" source="keywords">Nirmala Sitharaman</keyword> pushed up the long-term <keyword id="20301441" type="General" weightage="100" keywordseo="capital-gains-tax" source="keywords">capital gains tax</keyword> from 10% previously to 12.5% now. Moreover, <keyword id="22142879" type="General" weightage="20" keywordseo="indexation-benefit" source="keywords">indexation benefit</keyword>, which reduced the total tax outgo from the investor's hands, also went away with these proposed changes. As for short-term capital gains tax, it was decreased to 15% from its previous rate of 20%.<br /><br />However, to ease the pain, the maximum exemption amount for long-term capital gains in a single year was increased from Rs 1,00,000 previously, to Rs 1,25,000 now.<br /><br />All listed securities will be considered long-term capital assets (and hence, LTCG will be levied) if they are held for a period of 12 months. For unlisted securities and other immovable properties, LTCG will be applicable post 24 months of holding them. Bonds, debentures and gold will have also have a holding period of 24 months, from the earlier duration of 36 months, in order to be eligible for long-term capital gains tax. <br /><br /><strong>What does indexation mean? </strong><br />Indexation allowed <keyword id="19900618" type="General" weightage="20" keywordseo="investors" source="keywords">investors</keyword> to account for inflation, by adding the same to their initial purchase price. This would result in a higher purchase price, significantly lowering the overall gains. But now, capital gains tax will be calculated at the actual purchase price (ouch!) with no scope to factor for inflation, which would mean a higher tax outflow from the investor's pockets. This benefit has been done away with for real estate and gold.<br /><br />Under indexation benefit, it is not your initial purchase, or acquisition price that is taken into consideration, but rather your indexed cost of acquisition that comes to play. This is calculated using the CII of the sale year and the purchase year. This helps in adjusting the purchase cost of your property for inflation when you are selling it. <br /><br />The government calculates and notifies the public of the CII (cost inflation index) every year.<br /><br />For instance, Aditya's father purchased a property worth Rs 40,00,000 in 2009 (FY2009-10). In 2004 (FY2024-25), he decides to sell this for around a crore. How will his tax liability be calculated? <br /><br />First, lets consider that he had indexation benefit. By that, his indexed cost of acquisition (there's a long formula to this) would be Rs 98,10,810, making his long-term gains at Rs 1,89,189. So, 20% of this would come down to Rs 37,837. <br /><br />But lets also consider if he did not have this indexation benefit. While indexation benefits have been done away with starting July 23rd, 2024, lets assume this rule came into effect at the very start of FY25, or 1st April, 2024. This would mean your total capital gain would be 12.5% of Rs 60,00,000, or a staggering Rs 7,50,000. <br /><br /><strong>What are the experts saying?</strong><br />Nilesh Sharma - President &amp; Executive Director, SAMCO Securities sees this as a double whammy which leaves much to be desired on the investors front. "It seems govt wants share in investors’ profit. At a time when the equity indices are at an all-time high, the government has tried to take a share out of the growth and the profits earned by the investors by increasing both the STT rates on derivatives and an increase in STCG and LTCG", he notes <br /><br />"The removal of indexation benefit for LTCG will also impact the real estate industry and will slow down the resale of residential flats /lands. There is a fear that it may also increase the proportion of cash transaction in real estate deals, which will be again be counterproductive. The government has not announced any major changes for the individual tax payers except a slight change in the tax slabs and a minor increase in the standard deduction. This too, is however applicable only in the new tax regime, leaving nothing for the tax payers who have opted for the old tax regime", continued Sharma. <br /><br />Palka Arora Chopra, Director, Master Capital Services Ltd notes that the removal of indexation benefits might negatively impact investor returns, leading to a short-term bearish outlook for the sector. "While the 25% increase in the Long-Term Capital Gains (LTCG) tax is manageable and not likely to deter investors significantly, the increase in short-term capital gains (STCG) tax from 15% to 20% could have a more pronounced negative impact in the medium term", she continued. <br />

Decoding capital gains taxes: What FM Nirmala took from your pocket, what she gave you in Budget 2024

Do you invest in mutual funds? If you answer yes, the union budget, presented by <keyword id="20404376" type="General" weightage="20" keywordseo="FM-Nirmala-Sitharaman" source="keywords" meta.keywordsubtype="org" meta.entityname="FM Nirmala Sitharaman" meta.hostid="261" meta.entityid="FM Nirmala Sitharaman">FM Nirmala Sitharaman</keyword> recently threw up some surprises for your equity and <keyword id="21006653" type="General" weightage="20" keywordseo="mutual-fund-investments" source="keywords">mutual fund investments</keyword>. Going ahead, <keyword id="20584760" type="General" weightage="20" keywordseo="short-term-capital-gains" source="keywords">short-term capital gains</keyword> (STCG) will be taxed at the rate of 20%, up from its previous slab of 15%, while <keyword id="20584761" type="General" weightage="20" keywordseo="long-term-capital-gains" source="keywords">long-term capital gains</keyword> (LTCG) will attract a tax of 12.5% instead of the earlier 10%.<br /><h2>What's changed?</h2>The definition of specified mutual funds, which changes a lot. Previously, a specified mutual was one which invested less than 35% of its total assets in equity instruments. This meant an taxation ambiguity for ETFs (exchange traded funds), funds of funds and gold mutual funds, where the primary investment wasn't in debt securities, but another asset class like gold. However, since their investments in equities remained below 35%, they were clubbed with specified mutual funds, and taxed accordingly. <br /><br />Now, the budget has changed the definition of a specified mutual funds. From now on, any fund which invests more than 65% of its total proceeds in debt instruments would be classified as a specified mutual fund, and will be taxed as per the investor's income tax slab. But other categories, like Funds of Funds (FoF), gold mutual funds and ETFs will not be a part of these specified funds, and will be charged LTCG and STCG per the new tax norms. <br /><br />Units of gold mutual funds, FoF and other ETFs will be eligible for LTCG if they are held for a period of more than 24 months, and will be taxed at 12.5% sans indexation benefits. As for STCG on them, the requirement is that you sould have held units of these funds for less than 24 months. In this case, you will be charged 20% short-term <keyword id="20301441" type="General" weightage="100" keywordseo="capital-gains-tax" source="keywords">capital gains tax</keyword><br /><br />Here's a handy reckoner for you to check which asset class will be charged LTCG and STCG going ahead:<br /><br /><div type="image" title="Source: Valtrust" msid="111992244" hostid="261" sizebytes="47483"></div><br /><em></em><strong>How will your SIP investments be impacted on withdrawal?</strong><br />Buckle up, long-term investors! This is where the ride is about to get a little complicated, and tough.Say you start investing Rs 30,000 per month in SIPs from January this year, all of which goes in equity mutual funds. You're a dedicated, patient investor, but you need to fund a medical emergency, so you withdraw all the funds you've invested between January and July (just 6 months0, which is about Rs 2,10,000, which are now valued at Rs 2,60,000. With your capital gains at Rs 50,000, here's how you will be charged STCG tax. <br /><div type="image" title="Calculation of short-term capital gains" msid="111992475" hostid="261" sizebytes="32260"></div><br />Come next year, and you decide you want to go on a solo trip across Europe. You check your investments, and you have Rs 5,40,000 accumulated till July 2025, which have now grown to Rs 9,00,000. Since over one year has passed, their withdrawal will be subject to long-term capital gains. Per new announcement, here's how your funds will be taxed:<br /><br /><div type="image" title="Long-term capital gains" msid="111992482" hostid="261" sizebytes="41339"></div><br /><br />In case of debt funds, both long and short term capital gains will be taxed as per the investor's income tax slab. So, irrespective of your capital gains, you will be charged basis the tax regime you choose, and the applicable tax slab.

Budget 2024: Here's how your mutual fund investments are set to change post-budget

Up until 12.15 pm on July 23, the Indian benchmark index BSE Sensex was trading flat, as investors soaked in the the Union Budget 2024 announcements and altered positions on various sectors carefully. However, things changed fast post-noon, and within 15 minutes, the index nosedived sharply by almost 1000 points. So, what spooked investors and how will these proposed changes impact your portfolio returns? Read on!<br /><br /><h2>Increased <keyword id="173153" type="General" weightage="20" keywordseo="capital-gains-tax" source="Orion">capital gains tax</keyword></h2>The major reason behind the sharp fall was the finance minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword>'s proposed several changes in the <keyword id="20619608" type="General" weightage="100" keywordseo="capital-gains" source="keywords">capital gains</keyword> taxation regime. The FM announced an increase in short-term capital gains (STCG) rates on certain assets to 20% from 15%. Additionally, long-term capital gains (LTCG) on certain specified assets will now be taxed at 12.5% from 10%.<br /><br />To soften the blow, she announced a hike in the LTCG exemption limit to Rs 1.25 lakh per year. Unlisted bonds and debt mutual funds will continue to be taxed at the applicable rate.<br /><br />“While the increase in capital gains exemption from ₹1 lakhs to ₹1.25 lakhs will encourage the middle class to invest more in equities, mutual funds, and other linked products, an increase in long-term capital gains tax to 12.5% will have a significant impact on HNIs' decision process of investing in alternative asset classes where money is typically tied in for 4-5 years,” says Ms Pearl Agarwal, Founder and Managing Partner, Eximius Ventures.<br /><br />For the unversed, stocks held for less than a year are classified as short-term, and shares held for more than 12 months are termed long-term. Similarly, different asset classes carried different holding periods to be classified as either.<br /><br />Now, according to the Memorandum of the Finance Bill 2024, the finance minister intends to rationalise and simplify the capital gains taxation with a three-pronged approach. The Memorandum proposed that there will only be two holding periods for differentiating between long- and short-term: For all listed securities, the holding period is proposed to be 12 months, and for all other assets, it shall be 24 months.<br /><br />Thus units of listed business trust will now be at par with listed equity shares at 12 months instead of earlier 36 months. The holding period for bonds, debentures, gold, unlisted shares and immovable property will reduce from 36 months to 24 months. This reclassification is also expected to benefit investors as more and more assets with much shorter holding periods will be classified as long-term.<br /><br /><h2>Increased tax on <keyword id="47029" type="General" weightage="20" keywordseo="futures" source="Orion">Futures</keyword> and Options (<keyword id="44618" type="General" weightage="20" keywordseo="FO" source="Orion">F&amp;O</keyword>) transactions</h2>The government came down hard on the equity derivatives segment or the Futures and Options (F&amp;O) as it increased the Securities Transaction Tax (STT).<br /><br />According to the FM speech, "It is proposed to increase the rates of STT on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded."<br /><br />The move was largely in the expected lines, amid the unprecedented spike in futures and options (F&amp;O) trading across India. The government has often tried to curtail speculative trading with higher taxes to discourage retail investors from losing money similar to previous instances of higher taxes on income from lottery or cryptocurrencies. India's monthly F&amp;O turnover has risen dramatically to a record Rs 8,740 lakh crore (or $1.1 trillion) in March 2024 compared to a mere Rs 217 lakh crore (approximately $ 27 billion) in March 2019, accounting for over 80% of such trades in the world. <br /><br />However, market experts do not expect a major change in the net impact due to the recent drop in exchange turnover charges. "While STT has been increased on both Futures and Options from 1st October 2024, this is the same date when exchange turnover charges will be reduced. In my view the net impact of this will be largely net neutral for the customer. Example, STT on Options will increase by ₹3.75 per ₹10,000 round trip premium turnover while exchange turnover charges should reduce by approx ₹3.50 to ₹4," says Ashish Nanda, President and Head - Digital Business, Kotak Securities.<br /><br />To summarize, the proposed changes aim to streamline and simplify the capital gains taxation system by reducing the holding periods and adjusting the tax rates. The amendments will affect various financial instruments differently, with long-term capital gains on listed equity shares, equity-oriented funds, and business trusts seeing new exemption limits, while unlisted bonds and debt instruments will be subject to the regular applicable tax rates without indexation benefits.<br /><br />(With inputs from agencies)<br />

Budget 2024: Tax alterations affecting stock markets — capital gains tax, STT on F&O, and more

<ul><li>India plans to tax cryptocurrency transactions at a rate of 30%.</li><li>This is at par with the highest income tax slab applicable to individuals with an income in excess of ₹15 lakh per annum.</li><li>“The 30% rate of tax and restriction to set-off losses is a very bold move in discouraging transactions in crypto,” Ritesh Kumar, Partner at IndusLaw, told Business Insider.</li></ul>India may not have any laws to govern cryptocurrencies yet, but it doesn’t want to miss out on the gold rush. <br /><br />Finance Minister Nirmala Sitharaman announced that the country will be taxing all digital assets at a rate of 30% — no deductions or exemptions apply. This includes everything from cryptocurrencies to non-fungible tokens (NFTs) to other ways that people earn from digital assets, like yielding, farming and mining.<br />            <div type="ExtQuote" text="“Cryptocurrencies will be taxed at 30%. Any Income from the transfer of any virtual digital asset shall be taxed at 30%. No deductions and exemptions allowed. Loss from transfer of such assets cannot be set off against any other income.”" auname="Finance Minister Nirmala Sitharaman during the Union Budget 2022-23"></div><br />As compared to the conventional tax slabs, 30% is the <a href="https://stocktwits.com/Bush2000/message/432215643">highest tax bracket</a> applicable to individuals with an annual income of more than ₹15 lakh.<br />    <div type="image" title="Crypto tax ST post" msid="89278516" hostid="261"></div><br />Moreover, gifts of virtual assets shall also be taxed for the recipient. And, tax deducted at source (TDS) will be imposed on payments for the transfer of crypto assets at a rate of 1% for transactions over a certain threshold. However, Sitharaman did not specify what this ‘threshold’ will be.<br /><br />“Virtual digital assets, including a specific tax regime for virtual digital assets, such as crypto, while providing clarity is not in line with what the industry was expecting. The 30% rate of tax and restriction to set-off losses is a very bold move in discouraging transactions in crypto,” Ritesh Kumar, Partner at IndusLaw, told Business Insider.<br /><cmsannotation type="cmsannotation" annotationid="Many things remain uncertain" comment="subhead" text="Many things remain uncertain"><span data-til="noop">Many things remain uncertain<br /></span></cmsannotation>The budget also made way for the ‘digital rupee’ — a central bank digital currency (CBDC) that will be run by the Reserve Bank of India (RBI). In the post-budget press conference, Nirmala clarified that the CBDC will treated as a currency while all other cryptocurrencies will be treated, which are not controlled by the RBI, will be taxed at 30%.<br /><br />“This [tax rate] clears the air on taxes for cryptos, however, there are several types of incomes people earn from cryptos and hopefully more clarity will be available in the budget documents,” Archit Gupta, the chief executive (CEO) and founder of Clear (formerly ClearTax), told Business Insider.<br /><br />While many see the proposed tax on transfer of virtual digital assets as a step forward to remove some of the uncertainty in the market, the detailed guidelines will determine how the tax is actually implemented. <br /><br />“One would need to read the fine print, especially the definition of virtual digital assets, to understand the exact implications of the announcement. In absence of law regulating trading in crypto and digital assets, this is a step forward by the government of India,” said Rajat Prakash, the managing partner at Athena Legal.<br /><cmsannotation type="cmsannotation" annotationid="Crypto investors will no longer have the option of capital gains" comment="subhead" text="Crypto investors will no longer have the option of capital gains"><span data-til="noop">Crypto investors will no longer have the option of capital gains</span></cmsannotation><br />India was set to release its cryptocurrency bill during the Winter Session of Parliament, but it never made it into the house. According to Sitharaman, at the time, the bill was pending approval by the Cabinet — the highest decision-making body of the Indian government headed by Prime Minister Narendra Modi. <br /><br />“We do hope that the Government will give exchanges and other businesses a certain time period to enable the tech behind TDS deduction and bookkeeping. Offsetting and carrying forward losses have worked well in other countries but we are happy to see a consideration given to all such instances,” Vikram Subburaj, the CEO of Giottus Crypto Exchange, told Business Insider.<br /><br />Until now, as per the stand income tax rules, the gains on crypto transactions, fell either under ‘business income’ or ‘capital gains’, according to tax experts. The classification depended on the nature of the transactions and the tenure across which they took place.<br /><br />For instance, cryptocurrency transactions would be taxed as ‘capital gains’ if they are held with longer-term appreciation in value with fewer trades. Holding for less than three years would attract whichever rate is applicable under the prescribed brackets, and holding for more than three years would attract a 20% rate.<br /><br />Overall, however, the industry seems to welcome the move since it gives the crypto space a layer of legitimacy. "It gives much-needed clarity and confidence to the industry," said CoinDCX CEO and co-founder Sumit Gupta. <br /><br />"It’s a huge relief to see that our government is adopting the progressive stance of going ahead in the direction of innovation. By bringing in taxation, the government legitimises the industry to a large extent. The majority of people, especially corporates, who have been sitting on the sidelines because of uncertainties will now be able to participate in crypto," echoed WazirX's founder and CEO Nischal Shetty.<br /><br /><strong>SEE ALSO:</strong><br /> <a href="https://www.businessinsider.in/budget/news/digital-rupee-to-be-introduced-by-the-rbi-confirms-fm-nirmala-sitharaman-speech/articleshow/89268343.cms">Blockchain-based e-Rupee will be a reality before March 2023 confirms Finance Minister Nirmala Sitharaman</a><br /><a href="https://www.businessinsider.in/budget/news/from-new-updated-it-return-to-surcharge-on-ltcg-at-15-here-are-the-personal-finance-highlights-from-budget-2022/articleshow/89268183.cms">From new updated IT return to surcharge on LTCG at 15%, here are the personal finance highlights from Budget 2022</a><br /><a href="https://www.businessinsider.in/budget/news/indias-defence-budget-lays-out-more-money-for-local-contracts/articleshow/89267605.cms">India’s defence budget lays out more money for local contracts, a new independent approval body and leaves a quarter for R&amp;D</a><br />

From cryptocurrencies to NFTs, India to tax all ‘virtual digital’ assets at 30%

New Delhi, Feb 1 () Investor wealth plummeted by Rs 3.46 lakh crore on Saturday as equity markets came crashing after the Union Budget for 2020-21 failed to live up to expectations.
<p> The massive sell-off in equity market wiped out investor wealth, which fell by Rs 3,46,256.76 crore to Rs 1,53,04,724.97 crore on the BSE.
</p><p> Market capitalisation of BSE-listed firms plunged as BSE Sensex plummeted 987.96 points to close below the key 40,000-mark. It closed at 39,735.53.
</p><p> This was the benchmark's biggest drop since October 24, 2008, when it had plummeted 1,070.63 points, and the fourth biggest fall overall.
</p><p> "The lack of major growth boosting measures in itself is negative for the equity market. The new income tax regime would also be negative for tax exempt equity savings schemes. Recasting of dividend taxation norms also seem to be on the balance negative for most domestic equity investors. Overall, the budget seems to be negative for the equity market," Anand Rathi Shares &amp; Stock Brokers Chief Economist and Executive Director Sujan Hajra said.
</p><p> Motilal Oswal Financial Services Managing Director &amp; CEO Motilal Oswal said, "Markets have taken a cautious view on the Budget, the tax rate cut and DDT (Dividend Distribution Tax) benefit will help economy to grow and corporate payouts to increase. At these levels one should buy for long term."
</p><p> The government on Saturday proposed to remove DDT on companies, and henceforth the tax will be shifted to recipients at the applicable rate.
</p><p> Currently, companies are required to pay DDT on the dividend paid to shareholders at the rate of 15 per cent plus applicable surcharge and cess, in addition to the tax payable by the company on its profits.
</p><p> "The budget is good on intent. However, the key is efficient execution in a time-bound manner. There are many positives to simplify things and encourage entrepreneurs but again, key will be execution in a time-bound manner. Intent needs to be converted into implementation," Nilesh Shah, MD &amp; CEO, Kotak Mahindra Asset Management Company said.
</p><p> The finance minister said that improvement in revenue generation gives hopes of lowering fiscal deficit to 3.5 per cent of GDP in the next fiscal from 3.8 per cent in the current.
</p><p> From the 30-share pack on BSE, 24 companies suffered losses, led by ITC, Larsen &amp; Toubro, HDFC and State Bank of India.
</p><p> According to Krishna Kumar Karwa, Managing Director - Emkay Global Financial Services, investors are disappointed with no relief on long term capital gains (LTCG) tax and lack of big bang sectoral stimulus.
</p><p> "The removal of Dividend Distribution Tax seen as a continuation of earlier step of reducing corporate tax is well appreciated and sends the right signals to local and global investors," he added.
</p><p> At the BSE, 1,724 scrips declined, while 611 advanced and 126 remained unchanged.
</p><p> In the broader market, the BSE SmallCap index fell 2.20 per cent, while BSE MidCap index declined 2.21 per cent.
</p><p> "The markets have reacted negatively to the Budget, mainly due to some disappointments on account of non-abolition of LTCG, confusion about the impact of DDT removal and taxing dividends in the hands of recipients. Also the alternative provided to individuals for lower rate of tax, provided they do not claim exemptions/deductions, did not seem too attractive," HDFC Securities MD &amp; CEO Dhiraj Relli said.
</p> "The alternative tax system discourages investments which market participants do not seem to be comfortable with. The overhang of coronavirus outbreak on our markets also got magnified in the later half of the session. Foreign investors will look for signs of revival of growth before they commit funds," he said.   SUM 
RVK

Investor wealth erodes by Rs 3.46 lakh cr as mkts plummet after Budget announcement

New Delhi, Feb 4 () Industry body Amfi has sought clarification from relevant tax authorities with regard to the government's plan to scrap dividend distribution tax (DDT) on mutual funds and introduction of tax deducted at source on the income distributed by such products, officials said on Tuesday.
<p> Industry experts believe that the government's plan to tax dividend at the hands of investors could make dividend plans in equity and balanced schemes unattractive and investors may move towards growth plans.
</p><p> In addition, long-term investment plans such as equity-linked saving schemes and retirement products will be impacted too as the proposed tax regime has no deduction available.
</p><p> Finance Minister Nirmala Sitharaman in the Union Budget 2020-21 has proposed to abolish dividend distribution tax (DDT) on the dividend declared by companies and mutual funds to shareholders or unit holders.
</p><p> Once the DDT is abolished, the dividend amount will be added to investors' taxable income and taxed as per the individual tax bracket.
</p><p> Currently, mutual funds deduct the DDT and then hand over dividend to the unit holders.
</p><p> In addition, the minister introduced a 10 per cent TDS (tax deducted at source) provision on the income distributed by a mutual fund to its unit holders if such income exceeds Rs 5,000.
</p><p> The minister proposed the insertion of a new Section -- 194K -- in the Income Tax Act, which states "any person responsible for paying income arising from units of mutual fund or a specified company must deduct tax at the rate of 10 percent of such income", according to the Finance Bill 2020.
</p><p> Samco Head (RankMF) Omkeshwar Singh said a TDS of 10 per cent has been  introduced under new Section 194K for a payout of Rs 5,000 and above, however it is not clear if it considers only dividend or capital gains as well.
</p><p> "Industry body Amfi has sought formal clarifications from relevant tax authorities since TDS on long-term capital gains for equities is exempted up to Rs 1 lakh," he said.
</p><p> "We would need to wait for more clarification on this subject. Further, the new proposed tax regime has no deductions available under 80C, which was being used by governments to encourage long-term investment-cum-savings, that (ELSS or retirement) may get adversely impacted," he added.
</p><p> Several industry officials also said the Association of Mutual Funds in India (Amfi) has sought clarification from relevant tax authorities in this regard.
</p><p> "With the removal of DDT on mutual funds, dividend income from mutual funds is now taxable in the hands of the investors at their relevant tax slabs (subject to a 10 per cent TDS)," said Kaustubh Belapurkar, director, manager (research), Morningstar
</p><p> "We think this will make dividend plans in equity and balanced plans unattractive from a tax perspective for investors in the higher tax brackets as investors in a growth plan are liable to pay a LTCG (long-term capital gains) of 10 per cent," he added.
</p><p> Naveen Kukreja, CEO and co-founder of Paisabazaar.com, "The government's move will positively impact a small segment of individual investors, who are not in the highest tax slab and were investing in the fixed income instruments under the dividend option," said 
</p><p> Abhishek Bansal, Chairman and MD, Abnas Group of Companies, said the proposal is a positive move
</p><p> "Earlier, DDT was levied twice, first when a company would pay a dividend to an asset management company (AMC), second when the AMC would declare its annual profits. These year-end profits declared by the AMC could be availed of in two ways by the investor who is a customer of the AMC: Either the investor could take the gains out as a dividend or it could be invested back into the fund. If the investor took the dividend route, he would need to pay DDT again," he said.
</p><p> "This has now been replaced by a single simplified tax in terms of the abolishment of DDT and 10 per cent TDS to be applied by the AMC to its investors. This is hence a positive move,"  he added.
</p> Bansal said that now, the quantum of savings that would result because of this step needs some clarification from the government on whether the TDS is to be cut on the income component or on the entire proceedings. Clarification on the same will surely be available over the next few days as the industry has requested clarity on the same.   SP HRS

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