Real Estate Loses Out The Most: Listed Equity & Equity MFs Impacted

Unlisted debentures and unlisted bonds – they are of the nature of debt instruments and therefore any capital gains on them would be taxed at applicable rate, whether short-term or long-term

Sandipan Roy, CIO, Motilal Oswal Private Wealth

FinTech BizNews Service

Mumbai, July 23, 2024: Union Budget 2024 has impacted certain financial and non-financial assets. Sandipan Roy, CIO, Motilal Oswal Private Wealth studies  the impact on financial and non-financial assets:

Highest Impact on Real Estate:

1. Indexation – linked assets - Real Estate, Gold and Unlisted Equity had indexation benefits which now will not be there. Real Estate thus loses out the most.
2. Unlisted debentures and unlisted bonds – they are of the nature of debt instruments and therefore any capital gains on them would be taxed at applicable rate, whether short-term or long-term. Thus, unlisted debentures and unlisted bonds are proposed to be brought to tax at applicable rates by including them under provisions of section 50AA of the Act.

Other Instrument that will get impacted:

• Listed Equity & Equity MFs – 10% becomes 12.5% on LTCG and 15% becomes 20% on STCG
• Unlisted bonds and debentures, debt mutual funds and MLDs don’t get any respite either

Gainers:

• Unlisted equity – indexation goes, but LTCG at 12.5% after 24 months as a proposition works well given it is growth asset class
• Invits & REITs – LTCG after 12 months instead of the current 36 months is a big boon for these asset classes
• Gold – LTCG after 24 months is better than after 36 months

Clarification awaited for:

• Gold ETF & Gold Funds – LTCG after 12 months at 12.5% can be a big boost for this asset class (subject to interpretation)

Also, budget seeks amendment to Section 50AA :

Propose to amend the definition of “Specified Mutual Fund” under clause (ii) of Explanation of section 50AA to provide that a specified mutual fund shall mean a mutual fund:

1. A Mutual Fund by whatever name called, which invests more than 65%of its total proceeds in debt and money market instruments;

or

(b) A fund which invests 65% per cent or more of its total proceeds in units of a fund referred to in sub-clause (a).

The above amendment under clause (ii) of Explanation of section 50AA is proposed to be brought into effect from 1st day of April, 2026 and shall be applicable from AY 2026-27 onwards.

As and when implemented, this should benefit

• Offshore Equity Funds
• Fund of Funds