On July 23, the Finance Minister Nirmala Sitharaman presented the first full budget of the 3rd term of the NDA government. Here is the analysis of the proposals concerning the markets and investors.
For deepening tax base the Finance Minister has proposed to increase Securities Transaction Tax on Futures and Options contracts to 0.2% and 0.1%, respectively. This was expected to curb volatility in the market for which everyone including SEBI was concerned.
Also now income received on buyback of shares will be taxed in the hands of the recipient. As per the budget proposals now unlisted bonds and debentures, debt mutual funds and market-linked debentures will attract tax on capital gains irrespective of holding period.
In her bid to simplify capital gains taxation, the FM said short-term gains on some financial assets will now attract 20% as against 15% previously, while those on all other assets will continue to attract the current rates.
To benefit lower and middle-income classes, FM has proposed to increase the limit of exemption on some financial instruments for capital gains to ₹1.25 lakh a year.
The other major proposals in the Finance Bill relate to the withdrawal of an equalisation levy of 2 per cent, expansion of tax benefits to certain funds and entities in the IFSC and changes to the Benami Transaction Act enforcement.