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The government has proposed revision of capital gains taxes in equity funds and direct stocks.
While the government has proposed an increase in the short term capital gains (STCG) tax on equity funds from 15% to 20%, it proposes raising the long-term capital gains (LTCG) tax on equity funds from 10% to 12.5%.
However, the government has increased the exemption limit on LTCG from Rs.1 lakh per annum to Rs.1.25 lakh per annum. That means, LTCG is applicable on gains exceeding Rs.1.25 lakh per annum.
Also, in equities, long term will continue to be 12 months and more. However, for non-equity assets like real estate, gold and other, the duration of long term has been revised from 36 months to 24 months.
There is no change in debt taxation. It continues to be taxed at a marginal rate of taxation irrespective of holding period.
Let us look at the key highlights of the budget that matter to you:
Gold and silver ETFs to gain traction: The government has proposed reduction of custom duty on gold and silver to 6%. So far, it was 10%.
No TDS on dividend reinvestment: There will be no TDS on repurchase of units by mutual funds. This will benefit investors investing in dividend reinvestment plans.
F&O trading to be affected: The government has proposed increasing securities transaction tax (STT) rates on sale of option in securities to 0.1% and sale on futures in securities to 0.02%.
Some perks for salaried individuals: Standard deduction for salaried individuals is set to increase from Rs.50,000 to Rs.75,000 per annum. Further, the deduction limit for pensioners has been enhanced from Rs.15,000 to Rs.25,000.
New tax regime has become more attractive. The government believes that opting for the new tax regime could potentially help people save up to Rs.17,500 in income tax. Let us look at the proposed new slabs:
|
0-3 lakh rupees |
Nil |
|
3-7 lakh rupees |
5 per cent |
|
7-10 lakh rupees |
10 per cent |
|
10-12 lakh rupees |
15 per cent |
|
12-15 lakh rupees |
20 per cent |
|
Above 15 lakh rupees |
30 per cent |
Lower fiscal deficit target: The government has estimated a fiscal deficit of 4.9% of GDP for the current financial year, which will reduce to 4.5% of GDP next year.
Two critical reviews: The government will review the existing income tax provisions and new pension scheme (NPS). The committee will submit their report within 6 months. This indicates that we may see changes in NPS and tax norms in the next year’s budget.
