Finance Ministry denies report on short-term capital gains tax hike

Budget 2024 increased the STCG tax rate on specific financial assets from 15 to 20 percent.

The finance ministry has denied any plans to increase short-term capital gains (STCG) tax in response to a Moneycontrol report that said the government may consider raising the tax rate in the coming years, citing a senior official.

In a statement, the ministry termed the report as “incorrect, unduly speculative, misleading and factually incorrect in their entirety.”

Earlier, Moneycontrol reported that a government official said gains from short-term trading, primarily in shares or mutual fund units held for less than a year, should not be equated with long-term investments, and the current tax rate of 20 percent is reasonable but could go up.

“STCG is not an investment. No reason why STCG should be at 20 percent. It can be higher,” the official told Moneycontrol.

The finance ministry had not responded to an email seeking comments from Moneycontrol before the publishing of the story.

The Union Budget, presented on July 23, raised the STCG tax on specific financial assets to 20 percent from 15 percent.

A short-term capital gain arises if a capital asset held for less than a year is transferred. “Short-term gains on specified financial assets shall henceforth attract a tax rate of 20 percent instead of 15 percent, while that on all other financial assets and non-financial assets shall continue to attract the applicable tax rate,” finance minister Nirmala Sitharaman said in her Budget speech.

The tax-free limit for long-term capital gains on equity-related investments has been raised from Rs 1 lakh to Rs 1.25 lakh. The new limit will apply for FY 2024-25 and subsequent years, which, according to the government, will benefit lower and middle-income groups.