Budget 2024: No change has been proposed in the securities transaction tax (STT) and the Long term capital gains (LTCG) tax in the interim budget presented by finance minister Nirmala Sitharaman on 1st February’ 2024.
Market participants had been keenly watching any developments on LTCG and STT during the interim budget.
While no rise proposed in LTCG is positive, nevertheless there will be some disappointment too as expectations on the contrary had been building up on some respite being provided in the STT.
STT is a direct tax payable on the value of taxable securities transactions done through a stock exchange.
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ICRA analytics Note on Interim Budget for FY2024-25 had highlighted that removal of security transaction tax (STT) remains one of the key expectations of the market. The markets have had this demand for removal of STT for a few years now and as the GST collection went up, this demand has again gained traction. The move as per rating agency ICRA can attract more investors to invest in domestic equity markets.
The Double taxation on dividend also has been one key concern of investors. The company pays tax on its profit and at the same time the government levies tax on dividends in the hands of shareholders resulting in double taxation on dividends. Thus, a relief from double taxation on dividends would also have been appreciated by the markets.
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The Long Term Capital gains tax remains watched keenly as any rise in LTCG can impact equity fund flows into India and also make investments by individuals less attractive.
Simplification of capital gains structure was also one of the key expectations. Rating agency ICRA in its budget expectations has also highlighted that the capital gains taxation structure may be simplified by introducing a uniform holding period across domestic equities and mutual funds. Uniformity in tax treatment is expected to encourage higher compliance, said analysts. However, it needs to be noted that equity investors take higher risks than other investors and hence the same needs to be taken care of accordingly, ICRA had said.
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Published: 01 Feb 2024, 12:11 PM IST