Budget 2024: Long-Term Capital Gains Tax Hike A Surprise, Says EY's Pranav Sayta
The hike in short-term capital gains tax could be to temper short-term trading and raise revenue, Sayta said.
The increase in short-term capital gains tax was expected, but the hike in long-term capital gains tax was a surprise, said Pranav Sayta, national leader of international tax and transaction services at EY India.
In a series of reforms, Finance Minister Nirmala Sitharaman announced several key changes in the Budget 2024, presented on Tuesday. Adjustments to the tax regime, increased standard deductions for salaried employees, and the abolishment of the angel tax for investors were among them.
"The government has not compromised on the fiscal deficit. In fact, they have improved significantly. Full credit to the government for this," said Sayta.
Increase in short-term capital gains tax from 15% to 20% was expected, he said, attributing it to a strategy to temper short-term trading and raise revenue. However, the long-term capital gains tax adjustment was a surprise. "I don’t think the market will take it well," he said, adding that this is in early stage of implementation.
The abolition of angel tax is a major positive move for startups and the investment ecosystem, including foreign investors, he said.
Reduction of the corporate tax rate for foreign companies was also very welcome, according to him. "This was expected as well. When the corporate tax rate for Indian companies came down, they had not brought down the foreign companies' rates. This is a good levelling of foreign and Indian companies."
Sayta noted challenges of transitioning from the old to the new system, especially for those accustomed to benefits under Section 80C and House Rent Allowances.
"Those who are currently getting the benefits of HRA etc., are going to want to continue in the old regime, but most others are already slowly moving into the new regime."
