The government could soon introduce changes to the capital tax system to simplify it. The main consideration will be asset parity, and the Center may even consider changing tax rates, a report in The Economic Times (ET) said. Multiple holding periods can also be rationalized.
“The capital gains tax system is a bit complex. It needs to be simplified and streamlined,” said an official with knowledge of the matter. HEY.
A working group had recommended changes to the rules for indexing benefits in 2019. It should form the main basis for the review.
Under current rules, stocks and preferred stocks, equity-based mutual funds, zero-coupon bonds and UTI units are considered long-term assets if held for more than 12 months. .
Mutual funds focused on debt and jewelry are considered long-term assets if held for more than 36 months. In contrast, real estate or property is considered a long-term asset if it is held for more than 24 months.
As recommended by a task force led by Akhilesh Ranjan, a former member of the Central Board of Direct Taxes (CBDT), assets should be classified into three categories, stocks, financial assets other than stocks and other property . He recommended that the benefit of indexation be given to all but equity. It is currently authorized on debt funds and real estate.
It also recommended a 10% capital gains tax on the sale of equity securities held for more than 12 months. For shares held for less than 12 months, he asked for a 15% short-term capital gains tax.
However, for financial assets other than shares, it has been recommended that long-term capital gains be 20% if held for more than 24 months.
For other assets, he recommended a 20% tax indexed to earnings if held for more than 36 months, HEY added.
What are the current capital gains tax rules?
Under current rules, long-term capital gains are taxed at 20%. In the case of equity, if the gain is more than Rs 1 lakh, a tax of 10% is levied. However, a 15% tax is levied at short notice.
Short-term capital gains are taxed on other assets after being clubbed with income tax.