23rd July, 2024

DEZERV HOUSE VIEW

PERSISTENCE,
PRUDENCE,
PENALTY

We are pleased to share our analysis of the Union Budget 2024-25. This budget continues to build on the
government's commitment to sustainable economic growth and macroeconomic stability. With key
reforms in taxation, consistent policy measures, and strategic fiscal targets, the budget sets a solid
foundation for India's future economic trajectory.

While the budget encompassed various announcements, we have focused our analysis on what we
consider the most relevant aspects:

Government Spending Fiscal Deficit Capital Gains Tax Rejig

Below, we highlight these significant aspects of the budget and provide our perspective on their
implications

PERSISTENCE - CAPITAL EXPENDITURE 01

No significant changes in overall government expenditure as compared to the interim budget,
maintaining a stable fiscal policy. Key sectors such as defence, infrastructure, and social welfare continue
to receive substantial allocations. The focus continues to remain on incurring Capital Expenditure rather
than Revenue Expenditure. Capital Expenditure (17.1%) is growing almost 3x faster than Revenue
Expenditure (6.2%), this will help our country in building long-term assets.

11.1
C APIT AL EXP E N D I TURE S
9.5
( IN INR L A KH C RS )
7.4
5.9

3.4 4.1
2.8 3.1
2.6

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24PA FY25BE

Source: Budget Document, LMFS Research
PRUDENCE - FISCAL DEFICIT 02
The fiscal deficit target is set better than market expectations, showcasing the government's fiscal
prudence and commitment to economic stability. The current financial year fiscal deficit is pegged at
4.9% of GDP. Further it aims to reach a deficit below 4.5% next year.

9.2
F ISC AL D E FI C I T
( % OF G D P )
6.8 6.4
5.6
4.6 4.9
3.5 3.5 3.4

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24PA FY25BE

Source: Budget Document, LMFS Research

PENALTY - CAPITAL GAINS REJIG 03

Recent changes have been made to the capital gains tax structure in India. Short-term gains on financial
assets are now subject to a 20% tax rate. For long-term gains, a unified rate of 12.5% has been
implemented, applying to both financial and non-financial assets. This marks a significant shift in the tax
treatment of long-term capital gains. Additionally, the government has increased the annual exemption
limit for capital gains tax on financial assets to ₹1.25 lakh. These adjustments aim to simplify the tax
structure while potentially encouraging long-term investments.

EXHIBIT 1.1

Asset Class STCG Holding period LTCG

Equities and equity 20% 1 year 12.5%

mutual funds

Bonds (listed)/Listed Slab rate 1 year 12.5%

debentures

Slab rate
Debt and non-equity Classified as short-term gain regardless of
mutual funds the holding period

12.5%
REITs/InVITs 20% 1 year (without indexation
benefit)

continued...
 Other Assets

Asset Class STCG Holding period LTCG

12.5%
Physical real Slab rate 2 years (without indexation
estate
benefit)
12.5%
Unlisted equity Slab rate 2 years (without indexation
benefit)
Unlisted bonds Slab rate 2 years Slab rate
12.5%
Gold Slab rate 2 years (without indexation
benefit)
Unlisted debentures/
Slab rate NA Slab rate
MLDs
STCG- Short Term Capital Gain Tax | LTCG- Long Term Capital Gain Tax

Real Estate Capital Gains Tax Simulation as per Union Budget 2024

This table shows a Real Estate Capital Gains Tax Simulation for 2024, assuming a purchase price of INR 1 crore.
It compares taxable gains and LTCG under the Old Regime (with indexation) and New Regime (without
indexation) for properties bought in different years.

Year of purchase 2005 2010 2015 2020 2022

(19 yr holding) (14 yr holding) (9 yr holding) (4 yr holding) (2 yr holding)

(A) Purchase Price 1 Cr 1 Cr 1 Cr 1 Cr 1 Cr

(B) Sale Price (in 2024) 9 Cr 6 Cr 3 Cr 1.6 Cr 1.25 Cr

(C) Cost Inflation Index (CII) 117 167 254 301 331

(D) Indexed Cost in 2024 * 3.1 Cr 2.2 Cr 1.4 Cr 1.2 Cr 1.1 Cr

Taxable Capital Gains 39.4 L 15.33 L

5.9 Cr 3.8 Cr 1.6 Cr
(with indexation) (B-D)

Old Regime LTCG @ 20%

1.2 Cr 76.5 L 31.4 L 7.9 L 3L
(with indexation benefit)

New Regime LTCG @ 12.5%

1 Cr 62.5 L 25 L 7.5 L 3.1 L
(without indexation benefit)

Benefit 20 L 14 L 6.4 L 38,040 -5,853

*CII for 2024 = 363 Cr- Crore, L- Lakh

The Union Budget 2024-25 underscores the government’s commitment to a stable and sustainable economic
environment. Key changes in taxation and fiscal policies aim to promote long-term investment and
consumption, ensuring a balanced and growth-oriented economic trajectory. While there are no dramatic
shifts in expenditure, the strategic tax reforms and fiscal targets set a positive tone for the future economic
landscape.
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