India Budget 2024: 5 Key Takeaways for Investors
Union Finance Minister Nirmala Sitharaman presented her seventh Budget, proposing significant tax changes to support innovation and entrepreneurship in the Indian startup ecosystem.
25 July 2024
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Savleen Kaur
Long-term capital gains tax increased from 10% to 12.5%, impacting investor sentiment.
LTCG tax on property sales reduced from 20% to 12.5%, with the removal of the indexation benefit.
Angel Tax abolished, boosting the Indian startup ecosystem and encouraging venture capital investments.
India’s 2024 budget, announced after Prime Minister Narendra Modi’s re-election for a third consecutive term, presents a mixed bag for investors. With changes in taxes on share sales and property, and the abolishment of a tax hindering startup investments, the budget aims to balance economic growth with fiscal responsibility. Here are the key takeaways for investors:
Long-term Capital Gains Tax Increased
Finance Minister Nirmala Sitharaman announced an increase in the long-term capital gains (LTCG) tax from 10% to 12.5%. This move is seen as a step to cool activity in the Indian equity markets but might dampen retail investor sentiment. However, the exemption limit on capital gains was increased to ₹1.25 lakh ($1,493) per year. Additionally, listed financial assets held for more than a year will be classified as long-term, while unlisted financial assets and all non-financial assets must be held for at least two years to be considered long-term.
Market Reactions
Following the announcement, the BSE Sensex and Nifty experienced significant fluctuations. The Sensex fell by over 1,100 points to its lowest of the day but later recovered, closing with a gain of nearly 1,040 points. This volatility reflects investor reactions to the new LTCG tax and the increased Securities Transaction Tax (STT) on futures and options.
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LTCG Tax on Property Sales Reduced
The LTCG tax on property sales was reduced from 20% to 12.5%. However, the budget removed the indexation benefit for calculating LTCG on property sales, which could impact real estate investments. This change prompted a negative reaction in the market, with Nifty Realty down by nearly 2%.
Reduction in Custom Duties on Gold and Silver
The budget proposed cutting customs duty on gold and silver from 15% to 6%, aiming to boost domestic value addition in jewelry. This reduction led to a rally in jewelry stocks, including Titan and Kalyan Jewelers, and a significant drop in gold and silver prices on the MCX.
Abolishment of Angel Tax
In a significant move to support startups, the government abolished the Angel Tax for all classes of investors. This is expected to boost the startup ecosystem and entrepreneurial spirit in India. The Angel Tax, introduced in 2012 to curb money laundering through inflated share valuations, had been a burden on startups, affecting early-stage funding and innovation.
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