Touting the capital gains tax structure as ‘too complicated’, revenue secretary Tarun Bajaj said there is a need of a review of the current structure of the capital gains taxes reported Fortune India.
“My view is that we need to have an absolute re-look of the capital gains tax. Whenever I discuss it outside, it creates a lot of friction,” he said while addressing an interaction with the Confederation of Indian Industries (CII).
He pointed at a number of complications in the capital gains tax structure. “Number one is the rate itself, second in the issue of period. It is too complicated. For real estate we have made 24 months, for shares it is 12 months, for debt it is 36 months,” he elaborated.
However, he mentioned that capital gains tax is a work in progress. He further added that the Centre has done some work in this direction and but a lot of work is yet to be done. “We have done some work and reviewed the rates and duration elsewhere in the world. I think a lot of work needs to be done,” Bajaj adds, reported Fortune India.
It is worth remembering that the ministry of finance received numerous representations on capital gains tax prior to the Budget. Many of those demands related to uniformity in the Long-Term Capital Gains tax across the asset classes such as equity funds, debt and real estate.
For the uninitiated, income earned on the sale of long-term assets is known as long term capital gain (LTCG). When you sell a property, painting, jewellery, sculpture, land or even securities after holding them for a considerably long period, the profit accrued on such sale is taxed differently, and under the head of LTCG.
It is noteworthy that LTCG rates vary on various asset classes depending on the holding tenure as well as the type of the asset. For instance, the period of holding for listed equity for the purpose of LTCG is one year, while in case of unlisted shares, it is two years. In case of a listed debenture, the holding period for the purpose of LTCG is one year while for unlisted ones, it is three years. Likewise, LTCG is applicable if equity mutual funds are redeemed after one year while the time period is three years in case of the debt mutual funds, Fortune India further reported.
The revenue secretary also mentioned that personal income tax and several other issues are also being looked at by the government.
“The last bit is personal income tax. I look forward to suggestions on personal income tax,” he said.