Budget may tweak capital gains tax regime

The Budget may tweak capital gains taxes levied on equity, debt and immovable property to bring parity in varied tax rates and holding period, a senior official said.

Explaining the rationale, the official said there needs to have an alignment in tax rate and holding period for all the asset class.

Changes in capital gain tax expected in Budget, the official said.

The Budget for 2023-24 fiscal would be presented in Parliament on February 1, 2023.

When asked about possible tinkering in capital gains tax, Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta said: "It's part of budget process, can't divulge." Under the Income Tax Act, gains from sale of capital assets -- both movable and immovable -- are subject to 'capital gains tax'.

The Act, however, excludes movable personal assets such as cars, apparels and furniture from this tax.

The official said the current capital gains tax structure is 'complicated' and hence needs a relook.

"We are looking at the suggestions that have come in from stakeholders," the official added.

Depending upon the period of holding an asset, the long-term or short-term capital gains tax is levied.

The Act provides for separate rates of taxes for both categories of gains. The method of computation also differs for both the categories.

Currently, long term capital gains on shares is taxable at 10 per cent when the holding period exceeds 1 year.

For debt and immovable property, the tax rate is 20 per cent, while the holding period is 3 years and 2 years respectively.