Union Budget: 'Taxes have not been increased because...' FM shares her math around taxes, economy

In a post Budget discussion, Finance Minister Nirmala Sitharaman said that the government has not increased the tax rates for FY25 because it wants more money in hand. She added that but the government has noted that all asset classes are treated similarly.

Speaking at a discussion hosted by CNBC TV18, Sitharaman said: “Taxes have not been increased because I want more money… The decision is based on the idea that every asset class has to be treated similarly.” 

The taxes have not been increased with ‘a back of the envelope calculation’. She added that nothing is done with that intention or with the purpose that the government wants more money.

Sitharaman's answer came as a reaction when she was asked about the sudden change in the capital gains tax regime. 

In the Union Budget 2024-2025 presented earlier this week, it was announced that the short-term capital gains (STCG) tax rates on listed equity shares, equity-oriented mutual funds, and units of business trusts have increased from 15% to 20%.

Furthermore, the long-term capital gains (LTCG) tax rate has been revised from 10% to 12.5%. The exemption limit for LTCG has also been raised from Rs 1 lakh to Rs 1.25 lakh.

Moreover, for assets other than listed securities, the LTCG tax rate has been standardised at 12.5%, replacing the previous 20% rate with indexation benefits.

During her budget speech, FM Sitharaman said that going forward, short-term capital gains on specific financial assets will be subject to a tax rate of 20%, a 5% increase from the previous rate of 15%. It was clarified that this new rate will only apply to the specified financial assets, while all other financial and non-financial assets will continue to be taxed at their respective applicable rates.

The long-term gains tax rate for all financial and non-financial assets in the financial year 2024-25 will be set at 12.5 per cent. This tax rate adjustment is part of the government's initiative to support individuals belonging to middle and lower-income brackets by raising the exemption cap for capital gains.

Under the recent Budget 2024, the exemption limit for capital gains has been raised to Rs 1.25 lakh annually, a significant increase from the earlier limit of Rs 1 lakh per year. 

FM Sitharaman addressed concerns raised by the Opposition and several investors regarding the removal of the indexation benefit on the sale of old property. When questioned about the possibility of reviewing this decision, the FM stated: “I will hear all comments and suggestions with respect to tax changes but the Finance Bill now rests with Parliament."

It has been highlighted that the Union Budget 2024 has put forth a proposition to decrease the long-term capital gains tax on immovable properties from 20% to 12.5%. Additionally, it has been proposed to eliminate the indexation benefits used for inflation adjustments.

During a post-Budget session on July 24, Revenue Secretary Sanjay Malhotra said that the government anticipates an estimated revenue generation of Rs 17,000 crore resulting from the revisions in capital gains tax laws.