Simplifying India's Capital Gains Tax Structure: A Call for Reform
Experts urge the government to simplify the capital gains tax regime, seeking relief for stocks and real estate investments.
Capital Gains TaxUnion Budget 2024StocksReal EstateTax ReformReal Estate NewsJul 19, 2024
The capital gains tax was reintroduced in 2018, with a 10% Long-Term Capital Gains (LTCG) tax on gains exceeding Rs 1 lakh, without providing indexation benefits. This move was a significant departure from the previous regime established in 2004. Since then, experts have been advocating for a simplified and standardized tax system.
There are two categories of capital gains Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). The duration requirements for different types of assets vary, with listed securities and units of UTI, equity-oriented funds, and zero-coupon bonds having a 12-month holding period for STCG, and shares of unlisted companies and immovable property having a 24-month holding period.
Experts suggest that the government should streamline the classification of equity and debt instruments, unify tax treatment for listed and unlisted securities, and simplify indexation provisions. A single tax rate for long-term and short-term capital gains, regardless of whether the investment is equity or debt, listed or unlisted, is also recommended.
The Indian market is at a crucial juncture, and rationalizing the tax structure could foster investment and growth. Streamlining the taxes would not only simplify the tax regime but also encourage greater participation in equity markets, driving capital formation and economic growth.
Several experts have made recommendations for the Centre, including increasing the amount of capital gains not subject to tax, taxing all long-term capital gains at 10 percent plus applicable surcharge and cess without benefit of indexation, and introducing a uniform holding period for all securities.
Frequently Asked Questions
What is capital gains tax in India?
Capital gains tax in India refers to the tax imposed under the Income Tax Act, 1961 on the profits generated from the sale of capital assets like stocks, land, buildings, vehicles, and securities.
What is the difference between Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG)?
STCG is applied when an asset is held for a period not exceeding specific durations, while LTCG is applied when the holding period exceeds those durations.
What are the current tax rates for capital gains in India?
The tax rates on capital gains range from 10%-30%, depending upon the nature of financial asset and holding period.
What are the expert recommendations for the Centre regarding capital gains tax?
Experts recommend simplifying the tax structure, increasing the amount of capital gains not subject to tax, taxing all long-term capital gains at 10 percent plus applicable surcharge and cess without benefit of indexation, and introducing a uniform holding period for all securities.
Why is simplifying the capital gains tax structure important for the Indian economy?
Simplifying the tax structure could foster investment and growth, encourage greater participation in equity markets, drive capital formation, and promote economic growth.
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