Long term capital gains tax for non-residents on unlisted shares has been increased from 10% to 12.5% which will affect India's FDI investors
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Reacting to the Union Budget 2024, Vaibhav Gupta, a partner with Dhruva Advisors, one of the largest tax and regulatory firms in India, warned that returns of FDI investors will be impacted since the long term capital gains tax for non-residents on unlisted shares has been increased from 10% to 12.5%.
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However, he was optimistic about the budget's impact on the real estate sector returns, saying, "Removal of cost indexation on all assets is a very significant change which will impact real estate returns in a big way! At the same time, for Indian promoters wanting to sell their unlisted businesses, the reduction in the tax from 20% to 12.5% is a very welcome change. It brings listed and unlisted share sales at par."
He added, "Reduction of the holding period to two years for long term capital gains should be a big positive for the real estate sector. Lastly, the taxability of share transfer in an offer for sale has been clarified to provide that the cost offset will be based on indexation till FY2018, which brings this at par with the sale post listing."
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He pointed out that any capital gains on bonds and debentures will also be treated as short term capital gains now, which shall be taxed at the applicable tax rates. "While changes in buyback were anticipated, however treating buyback as dividend and allowing capital loss of the cost of purchase to the shareholders is likely to reduce the attractiveness of a buyback," he explained.
Union Budget 2024 LIVE | Making a record for any Finance Minister, Nirmala Sitharaman presented her 7th consecutive Union Budget on July 23, 2024 under the Modi 3.0 government. This Budget brought tax relief for the middle class, while focusing on jobs through skilling, incentivising employers. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.