Govt. mulls bringing changes in Capital Gain in the upcoming Budget

Govt. mulls bringing changes in Capital Gain in the upcoming Budget.

Changes in capital gains tax in India are expected in the next budget, an income tax official from India’s finance ministry said recently while delivering speech at an event in New Delhi. Reportedly, the official, speaking at the event, said India would exceed budget estimates for direct tax collection by 25-30% in FY2023.

“Making the capital gains tax structure more efficient needs legislative amendments. This may be taken up in the next budget as it cannot be done out of the blue,” an official said earlier.

At present, long-term capital gains are in general taxed at 20% and long-term capital gains on listed equities held for over a year is taxed at 10% on the portion of such gain above a threshold of ₹1 lakh. This provision was introduced with effect from 1 April, 2019.

The provisions under the Income Tax Act, 1961 prescribes the holding period for determining whether the gain made when selling the asset is short term or long term.

Under the current rules, immovable property is regarded as a long-term asset if held over 24 months while listed equities and preference shares, equity-based mutual funds, zero coupon bonds and UTI units are considered long-term assets if held for over 12 months.

Debt-oriented mutual funds and jewellery are considered to be long-term assets if held over 36 months.
Also presently indexation benefits are available in case of long term assets consisting immovable property, debt funds and non listed equity.

The Government may consider rationalising capital gain, considered as passive income, to align with other incomes which are being taxed at higher rates.