The government is examining possible changes to the capital gains tax regime to make it simpler, including rationalisation of the multiple holding periods, a report by Economic Times stated, quoting officials. Parity within asset classes will be a key consideration in the review that may even consider changes in the tax rate, it added.
"The capital gains tax regime is slightly complex. There is a case for simplifying and rationalising it," a government official aware of the deliberations told. He added that the direct tax task force report of 2019 is likely to be a starting point for the proposed exercise. A final call on the rationalisation of the holding period and the rates would be taken at the highest political level closer to the budget, the official said.
Currently, long-term capital gains are in general taxed at 20 percent. Long-term capital gains tax in the case of equities is 10 percent if the total gain in a financial year exceeds ₹1 lakh. The short-term capital gains tax rate for equities and related assets is 15 percent.
Immovable properties such as land, building, and house property held for over 24 months are categorised as long-term assets. Debt-oriented mutual funds or jewellery are considered long-term assets if held for over 36 months. The indexation benefit, or adjustment for inflation, is available for debt funds and real estate.
The task force, headed by former Central Board of Direct Taxes (CBDT) member Akhilesh Ranjan, had suggested three categories of assets: equity, non-equity financial assets, and all others including property. It proposed indexation benefits for all categories except equities, noted the report.
The panel suggested long-term capital gains (LTCG) tax of 10 percent for gains on the sale of equity assets held for more than 12 months and for equities held for a shorter period, a 15 percent short-term capital gains tax was proposed, it added.
For non-equity financial assets held for over 24 months, an LTCG of 20 percent with indexation was proposed for gains on sale. In the case of all other assets, a 20 percent tax with indexation on gains on sale post holding a period of 36 months was proposed, further informed the report.