The Union Budget for 2023-24 has maintained the taxes on long-term capital gains (LTCG) and short-term capital gains (STCG).
Any increase in LTCG rates generally is not taken positively because it leaves investors with less wealth. The current LTCG tax rate in India is 10% without indexation and is applied on gains exceeding Rs. 1 lakh on listed equity shares per fiscal year.
Investments that generate profits over a long period of time are referred to as long-term capital gains (LTCG). While assets that create profit and are kept for a short period of time are referred to as short-term capital gains (STCG).
For instance, if a shareholder holds an equity share for longer than a year, the capital gain is considered long-term and is taxed at 10%; but, if the shareholder holds an equity share for less than a year, the gain is deemed short-term and is taxed at 15%.
According to the budget document, the income from market linked debentures is proposed to be taxed as short-term capital gains at the applicable rates.
Investors' LTCG from the sale of equity shares was tax-free before the 2018 Union Budget. Such equity shares were already liable for the Securities Transaction Tax (STT). Only the gains from short-term investments were subject to the 15% tax.
To boost investor involvement in India's equity markets, it was decided to make LTCG tax-free. Due to the exemption, investors began considering stocks as a good investment option. However, following the 2018 Union Budget, LTCG on equity-oriented funds are taxed.
