The government may soon modify the capital tax structure to make it easier. According to The Economic Times (ET), the major focus will be asset parity, and the Centre may even consider modifying tax rates. The several holding periods might be rationalized as well.
“The capital gains tax structure is a little convoluted, and there is a justification for simplifying and rationalizing it,” an official with knowledge of the situation told ET.
In 2019, a task team suggested adjustments to indexation benefit regulations. It is planned to serve as the primary foundation for the evaluation.
Equities and preference shares, equity-based mutual funds, zero coupon bonds, and UTI units are considered long-term assets under existing laws if held for more than 12 months.
Long-term assets include debt-oriented mutual funds and jewelry kept for more than 36 months. Real estate, on the other hand, is considered a long-term asset if owned for more than 24 months.
According to the recommendations of a task group led by Akhilesh Ranjan, a former member of the Central Board of Direct Taxes (CBDT), assets must be classified into three types: equity, non-equity financial assets, and other property. It was suggested that the indexation advantage be extended to everyone but equities. It is now permitted in the context of debt funds and real estate.
It also proposed a 10% capital gains tax on the sale of stock assets held for more than a year. It requested a 15% short-term capital gains tax on equities held for less than 12 months.
Long-term capital gains on non-equity financial assets, on the other hand, were proposed to be 20% if held for 24 months.
ET said that for other investments, it advocated a 20% tax with indexation on profits held for more than 36 months.
What are the current regulations for capital gains tax?
Long-term capital gains are now taxed at a rate of 20%. In the case of equity, if the gain exceeds Rs 1 lakh, a 10% tax is paid. In the near term, however, a 15% tax is levied. Short-term capital gains on other assets are taxed after being combined with income tax.