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Government plans reform in ‘capital gains tax’

  • Published
    15th Mar, 2022
Context

The government is likely to revamp the capital gains tax structure in the next budget to augment revenue collections and boost spending on welfare schemes.

About

About Capital Gains Tax:

  • Capital Gains Tax is levied on the profits made on investments.
  • It covers real estate, gold, stocks, mutual funds and various other financial and non-financial assets. 
  • It is divided into long-term capital gains tax (LTCG) and short-term capital gains tax (STCG) depending on how long you have held the investment in question. 
  • Capital Gains Tax vs. Income Tax:
  • Unlike income tax, the percentage of Capital Gains Tax does not change on the basis of your overall tax slab. For example, the LTCG tax excluding surcharge on equity is the same for gains of ?10 lakh or ?10 crore. 
  • Moreover, there is also a separate set of deductions that apply to LTCG which do not apply to ordinary income.

About Capital Gains Tax in India:

  • At an estimate of Rs 80,000 crore of taxes from capital gains, it implies almost 6.4 per cent of the total direct tax collections of Rs 12.5 lakh crore were estimated in the revised stats for 2021-22.
  • In India, long-term capital gains on listed equities held for more than a year is taxed at 10% on the portion of such gain above a threshold of ?1 lakh. This provision was introduced with effect from 1 April 2019.
  • Short-term capital gain on listed equities held for less than a year is taxed at 15% in the case of listed shares and the applicable tax slab if it is unlisted.
  • Under the Income Tax Act, gains from the sale of capital assets, both movable and immovable, are subject to ‘capital gains tax’. Movable personal assets such as cars, apparel, and furniture are excluded from this tax.
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