Union Budget 2024 - A Brief Review Of Some Of The Key Direct Tax Proposals - Part II

The Finance Bill proposed that the long-term capital gains on the ransfer of unlisted securities or shares of a closely held company by non-residents (without payment of STT) on or after July 23, 2024, would increase from 10 percent to 12.5 percent.

- Adv Sherry Samuel Oommen

In the previous article, I had covered some of the key changes proposed vide Finance Bill, 2024 from a direct tax perspective. With the Finance Bill having now received the assent of the President on August 16, it has now become an Act.

In this article, I intend to dwell on two key changes that have been effected from a direct tax standpoint which was a departure from what was proposed by the Hon’ble Finance Minister in the Union Budget 2024. I was hopeful that the Government would consider certain changes to laws governing Goods and Services Tax (GST), which was not to be. In this article, I also wish to delve into one such issue which I was hoping that the Government would consider.

Change 1 - Indexation Benefit Vis A Vis Long-Term Capital Gains

As I had mentioned in the earlier article, the Finance Bill 2024 proposed a total discontinuation of the indexation benefit that was available on the transfer of any long-term capital asset like shares and securities, immovable properties, etc. for transfers made on or after July 23, 2024. This change was done considering the reduction of the long-term capital gains on these assets from 20% to 12.5%.

The said proposal of the Hon’ble Finance Minister in the Union Budget 2024 was a subject matter of strong resentment with representations being received from various quarters. After considering the genuine hardship arising from the withdrawal of indexation benefits, the Bill was amended to allow the benefit of indexation on long-term capital gains arising from the transfer of land or building, or both, acquired before July 23, 2024, by a resident individual and a Hindu Undivided Family (HUF). As apparent, the said benefit is available to an individual and a HUF, who is a resident and thus does not extend (for instance) to an individual who is a non-resident.