Possibility Of Changes In Capital Gain Taxation

To bring parity among the tax rates and holding periods for investments in equity, debt and immovable property Government is planning to bring some changes in Capital Gain Taxation. This is being done as presently asset classes are not taxed uniformly and have different holding periods for levying the capital gain tax which needs to be aligned. The changes in Capital Gain Taxation are expected in the Budget 2023.

Currently, taxation is based on the holding period. Long Term Capital Gains are generally taxed at the rate of 20%. Investments in equity or equity-linked mutual funds for more than one year are considered long-term and chargeable at the rate of 10% over Rs. 1,00,000/-.

Immovable Properties held for more than 24 months are categorized under long-term assets whereas Debt Oriented Mutual Funds or jewelry held for more than 3 years are considered as Long Term.

Investments in equity held up to one year are considered short-term and chargeable at the rate of 15% and in the case of other assets, short-term gains are taxed as per applicable slab rates by including it with the Total income.

The government is also planning to reduce complexities in the Individual Tax structure, especially related to exemptions.

The suggestions for changes are to categorize the assets into equity, non-equity financial assets, and all others including property, and proposed indexation benefits for all categories except equities. There may be changes to the holding period for the classification of Long term and Short term. Reduction of the holding period for financial products and an increase in the holding period for land and building will be encouraged to discourage speculative transactions. As an investor, you should be ready for some changes in capital gain tax rules and be prepared for the likely results on your investment decision.

As the capital gain tax regime is a complex one so changes to simplify and rationalize it are highly needed. We hope that changes to taxation in the upcoming budget bring some clarity and remove the hardships faced by taxpayers.

For more clarifications/information, please contact us at info@taxreturnwala.com