Income Tax Budget 2024 Live: Top 2 measures to make capital gains tax structure simpler
- Standardize capital gains tax across financial instruments
The government may look at simplifying the existing capital gains tax regime due to its complexity around different holding periods and tax rates across different category of assets. For example, the period of holding for debt instruments (other than some specified securities) is 36 months, for immovable property it is 24 months whereas for listed equity shares/equity-oriented mutual funds it is only 12 months.
Also, currently the base rate for taxation of long-term capital gains from listed equity shares/equity-oriented mutual funds is 10% without indexation (on gains exceeding Rs 1 lakh), while other long-term gains are taxed at 20% with or without indexation, depending on the nature of the asset.
Standardization will help reduce complexity and interpretation challenges.
- Increase limit of tax free capital gains from current Rs 1 lakh to Rs 3 lakh
Effective Financial Year 2018-19, Long Term Capital Gains (LTCG) exceeding Rs 1 Lakh earned from transfer of equity shares of a company or units of equity oriented mutual funds on which Securities Transaction Tax has been paid at the time of acquisition, are subject to tax @ 10% without indexation benefit. To boost investor confidence and incentivize infusion of further investment into the capital market, the government may consider enhancing the exemption limit from Rs 1 to Rs 3 Lakh.
The above recommendations were given by Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax, KPMG in India as part of the Times of India Online pre-Budget 2024 survey.