Thursday, December 1 2022


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.

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