International Tax updates for India –effective from 27 July 2024

On 23 July 2024, the Indian Finance Minister (FM) presented the Finance Bill (No. 2) 2024, highlighting the government’s vision to include a technology-driven and knowledge-based economy with strong public finances, and a robust financial sector. This year’s budget adopts the following four priorities: 1) Energy Security 2) Infrastructure and Investment 3) Employment and 4) Next Generation Reforms.

Of particular note for FPIs, the following tax changes were announced to be effective immediately (i.e., for sale transactions executed from 23 July 2024):

• Increase in long term capital gains tax (CGT) on sale of listed securities from 10% to 12.5%
• Increase in short term CGT on sale of listed securities from 15% to 20%
• Unlisted debentures/ bonds are to be categorized as short-term capital assets irrespective of the period of holding
• Classification of gains into short term and long term has been streamlined into two holding periods of 12 months and 24 months

The following changes will be effective from 1 October 2024:

• Increase in STT rates for F&O transactions
• Share buybacks will be taxable as deemed dividend in the hands of shareholders

Deloitte India has prepared a summary of the key tax proposals relevant to Funds which can be found here. You can also find a recently recorded webinar as well.

Further, the Central Board of Direct Taxes (CBDT) in India issued a Frequently Asked Questions providing further clarification of the proposed new capital gains regime.