[Opinion] Decoding the Fine Print of the Budget 2024-25 | Amendments in Direct Tax Domain

Mayank Mohanka – [2024] 164 taxmann.com 538 (Article)

The much-awaited Union Budget 2024-25 has been presented by our hon’ble Finance Minister Smt. Nirmala Sitharaman today on 23rd July 2024, before the Parliament. The budget speech of FM highlighted some very welcome budget amendments in the direct tax domain. However, the Fine Print of the Finance (No.2) Bill, 2024, revealed some additional very significant and critical budget amendments in the direct tax domain, which are being analysed and explained below, for ready reference of Readers.

1. Amendments pertaining to Capital Gains

• Section 2(42A) of the Act is proposed to be amended to provide that for all listed securities, the holding period to qualify as long-term capital gain, will be 12 months and for all other assets, it shall be 24 months.
• The rate for short-term capital gain under provisions of section 111A of the Act on STT paid equity shares, units of equity oriented mutual fund and unit of a business trust is proposed to be increased to 20% from the present rate of 15%.
• The rate of long-term capital gains under provisions of various sections of the Act is proposed to be pegged at 12.5% without indexation benefit, in respect of all category of assets. This rate earlier was 10% for STT paid listed equity shares, units of equity-oriented fund and business trust under section 112A and for other assets it was 20% with indexation under section 112.
• An exemption of gains upto 1.25 lakh (aggregate) is proposed for long-term capital gains under section 112A on STT paid equity shares, units of equity oriented fund and business trust, thus, increasing the previously available exemption which was upto 1 lakh of income from long term capital gains on such assets.
• Unlisted debentures and unlisted bonds are proposed to be taxed at applicable rate slab rate of the investor, whether short-term or long-term, by including them under provisions of section 50AA of the Act.
• The indexation benefit available under 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.
• It is proposed to substitute clause (iii) of section 47 and its proviso, to provide that nothing contained in section 45 shall apply to transfer of a capital asset, under a gift or will or an irrevocable trust, by an individual or a Hindu undivided family. Thus, gifts made by companies will be considered as ‘transfer’ only u/s 45, for the purpose of capital gains tax.
  These amendments shall come into effect from the 23rd day of July, 2024.

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