NEW DELHI: In the Union Budget 2024, the Modi-led government's third term introduced a revamped capital gains tax structure. Finance Minister Nirmala Sitharaman explained that most people would benefit from this new structure, emphasizing that the government undertook a thorough review before implementing these changes.

The removal of indexation will be advantageous for many. Unlisted companies, in particular, will see significant benefits from this 20% indexation removal, as their annual returns typically exceed 13-14%. They have welcomed this change enthusiastically. Sitharaman expressed her belief that even in the real estate sector, the majority will benefit. "People are focusing on the removal of indexation rather than the tax rate reduction from 20% to 12.5%," she stated.

Sitharaman, who presented her seventh consecutive Budget, clarified the government's rationale behind these changes, dismissing concerns about potential disadvantages. "In almost every scenario, people will experience a lower tax burden under this system. Small and medium investors in the market or property will benefit," she assured.

On July 23, the Finance Minister announced a reduction in long-term capital gains tax on property and gold from 20% to 12.5%, while eliminating the benefit of adjusting for inflation. However, the indexation benefit remains available for properties bought up to 2001.

"This should be viewed as a rationalisation and simplification exercise. The government has always aimed for a simple tax regime that is easy to understand and implement. The introduction of GST was a monumental reform in line with this vision. Similarly, several measures for simplifying income tax have been announced, with more in the pipeline, including a comprehensive review of income tax. This capital gains change is just one part of a broader effort," Sitharaman elaborated.

Budget 2024: Capital Gains Tax Overhaul
The Budget 2024 proposed a significant overhaul of the capital gains structure for financial securities. It streamlined long-term and short-term capital gain tax rates and tenures for both listed and unlisted shares, as well as other financial products.

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