Budget 2025 amends the Definition of ‘Capital Asset’:

Budget 2025 amends the Definition of ‘Capital Asset’ The Union Budget 2025 presented by the Hon'ble Finance Minister Nirmala Sitharaman in parliament on 1st Feb 2025. Various changes and amendments made in direct taxation this Budget. The Budget 2025 made amendment of definition of ‘Capital Asset’.

New Definition of ‘Capital Asset’

Section 2(14) of the Act defines the term “capital asset” to include property of any kind held by an assessee, whether or not connected with his business or profession, but does not include any stock-in-trade or personal assets as provided in the definition. Securities held by a Foreign Institutional Investor who has invested in such securities in conformity with the regulations enacted under the Securities and Exchange Board of India Act, 1992 (15 of 1992), are also considered capital assets. There is major challenge in determining whether income from securities transactions is capital gain or business income for investment funds (as indicated under clause (a) of Explanation 1 to section 115UB of the Act). With a view of providing certainty in respect of the above, it is proposed to amend the Act to provide that any security held by investment funds referred to in Section 115UB which has invested in such security in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 would be treated as capital asset only so that any income arising from transfer of such security would be in the nature of capital gain. This amendment will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the assessment year 2026-27 and subsequent assessment years.