FM concludes speech, revises tax structure under new tax regime; STT on F&O hiked

The headline equity barometers crashed as the government proposed to raise the tax on capital gains and on trading derivatives. The Nifty traded below the 21,300 mark.

At 12:40 ST, the barometer index, the S&P BSE Sensex, was down 656.33 points or 0.80% to 79,845.75. The Nifty 50 index shed 216.70 points or 0.88% to 24,292.55.

In the broader market, the S&P BSE Mid-Cap index declined 0.21% and the S&P BSE Small-Cap index added 0.13%.

The market breadth was negative. On the BSE, 1,823 shares rose and 1,889 shares fell. A total of 141 shares were unchanged.

Union Budget 2024:

Finance Minister Nirmala Sitharaman concludes the first Union Budget of the Modi 3.0 government. FM announces changes to the new tax regime, including an increase in the standard deduction from Rs 50,000 to Rs 75,000. Salaried employees under the new tax regime will save up to Rs 17,500 in income tax.

In the new tax regime, the tax rate structure will be revised as follows: income up to Rs 3 lakh will be taxed at zero; Rs 3 lakh to Rs 7 lakh will be taxed at 5%; Rs 7 lakh to Rs 10 lakh will be taxed at 10%; Rs 10 lakh to Rs 12 lakh will be taxed at 15%; Rs 12 lakh to Rs 15 lakh will be taxed at 20%; and income above Rs 15 lakh will be taxed at 30%.

The Securities Transaction Tax (STT) on futures and options (F&Os) is proposed to be increased to 0.02% and 0.01%, respectively.

Additionally, the Finance Minister states that long-term capital gains on all financial and non-financial assets will be taxed at a rate of 12.5%. The limit of exemption for capital gains will be set at Rs 1.25 lakh per year. Listed financial assets held for more than a year will be classified as long term.

The FM states that the union government will target a fiscal deficit of 4.9% of the gross domestic product (GDP) for FY25, compared to the 5.1% target set in the interim budget. Gross borrowing is targeted at Rs 14.01 lakh crore, with market borrowing at Rs 11.06 lakh crore. The fiscal deficit target for FY26 is set at 4.5% of GDP.

Sitharaman notes that the government will maintain strong fiscal support for infrastructure, allocating Rs 11.11 lakh crore for capital expenditure, amounting to 3.4% of India's GDP. The government also allocates Rs 1.52 lakh crore for agriculture and allied sectors.

The Finance Minister emphasizes expanding the space economy by five times over the next 10 years, supported by a venture capital fund of Rs 1,000 crore. GST has significantly reduced tax incidents for the common man and eased compliance for industry. To enhance the benefits of GST, the government will strive to rationalize the tax structure.

The Finance Minister adds that rules and recognition for Foreign Direct Investments (FDIs) will be simplified to facilitate their inflow, aiming to promote the use of the Rupee for overseas investments. Sitharaman also proposes supporting the development of corridors at Vishnupad Temple and Mahabodhi Temple, following the model of the Kashi Vishwanath Temple, and backing the development of Nalanda in Bihar as a tourist center. An economic policy framework will be introduced to usher in next-generation reforms aimed at boosting economic growth. Additionally, the government will provide assistance to Odisha for the development of tourism.

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