Union Budget 2024: Why the Stock Market Rumbled After FM Nirmala Sitharaman Announced Capital Gains Tax Hike

The 2024 budget of the Modi government (3.0) has delivered a significant shock to stock market investors by increasing the long-term capital gains tax by 2.5% to a total of 12.5%. Additionally, the short-term capital gains tax (STCG) on select properties has risen to 20%. As a result, the stock market is currently experiencing a major downturn.

Here’s a breakdown of the capital gains tax structure:

Capital gains tax is categorized into two types when it comes to the stock market. If a stock is sold within one-year, short-term capital gains tax is applied, which is levied according to your income tax slab. Conversely, if a stock is sold after one year, long-term capital gains tax is applicable. Profits up to Rs 1 lakh are exempt from tax, but any profit exceeding this threshold incurs a 10% tax.

What is Capital Gains Tax?

Capital gains tax is the tax imposed on profits realized from the sale of an asset. It consists of two types: short-term capital gains tax and long-term capital gains tax. Short-term capital gains are taxed at 15%, while long-term capital gains are taxed at 10%. Furthermore, no tax is payable on annual capital gains up to Rs 1 lakh.