The Government of India enacted the Finance (No. 2) Act, 2024, on 16 August 2024, after receiving Presidential assent. The bill has already been passed by the parliament’s Lower House (Lok Sabha) and the Upper House (Rajya Sabha). This legislation introduces a series of amendments aimed at reforming various tax laws.

Reduction in the corporate tax rates for foreign companies

The corporate tax rate for foreign companies operating in India has been lowered from 40% to 35% on income, excluding income subject to special rates under sections 110 to 115 of the Act.

Tax incentives to International Financial Services Centre (IFSC)

To promote the development of world-class financial infrastructure in India, several tax concessions have been granted to units in the IFSC under the Act in recent years under clause (4D) of section 10 of the Income-tax Act. The IFSC is a jurisdiction that provides financial services to residents and non-residents under existing regulations in any currency except the Indian Rupee (INR).

Revision of securities transaction tax (STT) rates

Effective 1 October 2024, the STT tax rate on the sale of options in securities has been raised from 0.0625% to 0.1% of the option premium. Based on the trading price of these futures, the rate for the sale of futures in securities has increased from 0.0125% to 0.02%.

Amendment of long-term capital gains tax rates

The rate of long-term capital gains has been amended to 12.5% for all asset categories. The exemption for long-term capital gains on STT-paid equity shares, units of equity-oriented funds, and business trusts has been raised from INR 100,000 to INR 125,000.

The tax rate for listed bonds and debentures will be reduced to 12.5%. However, unlisted debentures and bonds and capital gains on other debt instruments will be taxed at the applicable rate, irrespective of their short-term or long-term status.