Centre likely to simplify capital gains tax structure in Budget: Official

According to a senior official on Tuesday, the government will probably simplify the capital gains tax system to align the tax rates and holding period across the asset class in the upcoming Budget.

The representative described the current capital gains tax system as “complex.”

Listed shares are currently subject to a more lenient long-term capital gains tax (LTCG) than other assets, such as real estate, which requires taxpayers to keep these assets for longer periods of time in order to avoid paying higher short-term taxes.

“We need to reevaluate the rates and holding periods for the capital gains tax structure.” The official stated, “We would be open to changing the structure.” “We are reviewing the suggestions received from stakeholders,” was the statement.

For listed shares and debt securities, the holding period for long-term capital gains tax is more than 12 months; for unlisted shares and real estate, it is more than 24 months; and for debt mutual funds and securities, it is more than 36 months.

Analysts are optimistic that the tax reform will result in a reduction of the tax burden on gains from the sale of unlisted equity shares, units of real estate investment trusts, and possibly even debt funds.

Short-term gains are taxed at 15% (STCG) for both domestic and foreign investors, while long-term capital gains (LTCG) on listed shares are 10% on gains exceeding Rs 1 lakh without indexation benefit. While the STCG is paid at the applicable slab rate of the individual concerned, the LTCG is payable at a rate of 20% on unlisted shares for domestic investors and 10% for non-residents. Similar to how LTCG is 20% with an indexation benefit, STCG on debt funds is determined by the investor’s tax bracket.

When it comes to holding durations, stakeholders want listed and unlisted stocks to be equal. Additionally, there is the problem of unlisted shares having higher tax rates for short- and long-term capital gains than listed shares.

The government last made changes to the capital gains tax structure in the budget for fiscal year 2019 when it reinstated LTCG on listed shares. The increase in capital market activity over the past two years has brought in significant tax revenues for the government through the capital gains tax.

Leave a Reply

Your email address will not be published.

Latest

OpenAI Appoints Pragya Misra as Government Relations Head in India

OpenAI, the renowned developer of ChatGPT and a frontrunner in artificial intelligence research, has taken a significant step in expanding its global footprint by hiring its first employee in India. Pragya Misra, appointed as the government relations head, will play a pivotal role amid India’s ongoing elections, which are crucial for shaping AI regulations in […]

Read More
Latest

From Retirement to Revitalization: The Growth of Senior Living in India

The world’s elderly population is surging and India is expected to accommodate upto 17 per cent of the world’s elderly population by 2050, said a report by CBRE South Asia Pvt Ltd. In India, the segment is witnessing substantial growth, driven by favorable demographics, rising chronic conditions, and increasing awareness. And with the rising number […]

Read More
Latest

Tata’s Strategic Moves in India’s EV Market: A Closer Look

  Tata Motors, a stalwart in India’s automotive sector, is making strategic maneuvers to capitalize on the evolving landscape of electric vehicles (EVs). With the recent announcement of importing Jaguar Land Rover (JLR) luxury electric cars under a new government policy, Tata is positioning itself at the forefront of the country’s electric mobility revolution. The […]

Read More