Budget 2024: Following Budget 2024, the Indian stock market suffered a significant setback in a sudden turn of events. The recent tax announcement by Finance Minister Nirmala Sitharaman caused a big sell-off on Dalal Street, resulting in a steep decline in 2,971 stocks. The sudden tax revisions took investors by surprise and sent shockwaves across the market. This article explains about the causes of this bloodbath and how the tax laws have changed the situation for Indian stock market investors.
Key Tax Changes Impacting Dalal Street
Increased STT Rate
In a move to broaden the tax base, Sitharaman increased the STT rate on equity and index trades from 0.01 percent to 0.02 percent. She stated, “I propose to increase the Security Transactions Tax on futures and options of securities to 0.02 percent and 0.1 percent, respectively.”
Higher STCG and LTCG Taxes
Short-term capital gains on financial assets will now be taxed at 20 percent, up from 15 percent. The Finance Minister explained, “Short-term gains on certain financial assets shall henceforth attract a tax rate of 20 percent, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate.”
Long-term capital gains on financial and non-financial assets will now attract a tax rate of 12.5 percent, up from 10 percent. Sitharaman noted, “Long-term gains on all financial and non-financial assets will be taxed at 12.5 percent.”
Extended Holding Period for Non-Listed Assets
Sitharaman also announced that non-listed assets would need to be held for at least two years to be classified as long-term, up from the previous one-year requirement. Listed assets, including equities, remain unaffected by this change.
Impact on Unlisted Financial Assets
The Finance Minister clarified that unlisted bonds, debentures, debt mutual funds, and market-linked debentures would attract capital gains tax at applicable rates, regardless of the holding period. “Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will need to be held for at least two years to be classified as long-term,” she said.
Immediate Market Reaction
In the wake of these revelations, 2,971 stocks on Dalal Street fell sharply. But later in the day, the market bounced again, and 811 equities were able to maintain their early gains.
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