Streamlining Capital Gains Tax Regime: A Necessity for Economic Growth
Experts call for simplification of capital gains tax structure, uniform holding periods, and tax relief for stocks and real estate.
Capital Gains TaxUnion Budget 2024StocksReal EstateTax ReliefReal EstateJul 19, 2024
The simplification and standardisation of this tax system have the potential to substantially affect investors and the overall economy. There are two categories of capital gains 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.
Experts have said that the current capital gains tax regime is complicated due to various factors like asset classes, holding periods, tax rates, and residency status. To address these challenges, it is recommended that the government streamlines the classification of equity and debt instruments, unifies tax treatment for listed and unlisted securities, and simplifies indexation provisions.
Simplification of the capital gains tax structure is required, according to Shalini Jain, Tax Partner, EY India.
Frequently Asked Questions
What is capital gains tax?
Capital gains tax 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 are the two categories of capital gains?
The two categories of capital gains are Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG).
Why is simplification of capital gains tax structure necessary?
Simplification of capital gains tax structure is necessary to enhance compliance by taxpayers, reduce administrative burden on tax authorities, and promote economic growth.
What are the recommendations made by experts for capital gains tax?
Experts have recommended increasing the amount of capital gains which are not subject to tax, taxing all long-term capital gains at 10 percent plus applicable surcharge and cess without benefit of indexation, introducing a uniform holding period for all securities, and considering a uniform holding period for all immovable and moveable assets other than securities.
How will simplification of capital gains tax regime benefit investors?
Simplification of capital gains tax regime will benefit investors by creating a more conducive environment for investments, reducing multiple layers of taxation, and promoting capital formation and economic growth.
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