Capital Gain Tax News Today: A report on Tuesday claimed that the Government is considering an increase in capital gains taxes for the top income earners. The Government has denied having any such proposal.
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Capital Gain Tax News Today: A report on Tuesday claimed that the Government is considering an increase in capital gains taxes for the top income earners in a bid to reduce inequality in the country. The report by Bloomberg further claimed that such changes may take place if the Narendra Modi Government retained power in the 2024 Lok Sabha Elections.
However, the Income Tax Department has clarified that there is no such proposal under consideration before the Government on Capital Gains Tax.
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“It is clarified that there is no such proposal before the Government on capital gains tax,” the Income Tax Department tweeted. That said, here is a look at the current rules for what qualifies as long and short-term capital assets and how they are taxed.
According to the Income Tax rules, any profit or gain arising from the transfer of capital assets during the financial year is charged to tax under the head “Capital Gains”.
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There are two types of capital gains taxes – Short Term Capital Gains (STCG) and Long Term Capital Gains Tax (LTCG).
Short-Term Capital Assets
If a capital asset is held by an assessee for a period of not more than 36 months then it is deemed as “short-term”. However, there are some exceptions in which case some assets held for not more than 12 months or 24 months are treated as short-term capital assets. These exceptions are:
- Short-Term Capital Assets for 24 months:
- The following assets are considered short-term capital assets for taxation if they are held for not more than 24 months:
- Unlisted shares of a company (equity shares or preferences shares)
- Any immovable property such as land or building or both.
- Short-Term Capital Assets for 12 months
- The following assets are considered short-term capital assets for taxation if they are held for not more than 12 months:
- Listed shares of a company
- Listed securities other than a unit (i.e Debentures, Bonds, Derivatives, Government Securities etc)
- Units of UTI (listed or unlisted)
- Units of Equity-Oriented Funds (Listed or Unlisted)
- Zero-Coupon Bonds (Listed or Unlisted)
- High Premium Equity Oriented ULIP
- Long-Term Capital Assets
- Capital Assets held by an assessee for more than 36 months are considered long-term capital assets. But there are some exceptions under which some assets held for not more than 36 months but more than 12 months or 24 months are treated as long-term capital assets.
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Long-Term Capital Assets
Capital Assets held by an assessee for more than 36 months are considered long-term capital assets. But there are some exceptions under which some assets held for not more than 36 months but more than 12 months or 24 months are treated as long-term capital assets.
- Long-Term Capital Assets for 24 months:
The following assets are considered long-term capital assets for taxation if they are held for more than 24 months:
- Unlisted shares of a company (equity shares or preferences shares)
- An immovable property (land or building or both)
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- Long-Term Capital Assets for 12 months
The following assets are considered long-term capital assets for taxation if they are held for more than 12 months:
- Listed shares of a company (equity shares or preference shares)
- Listed securities other than a unit (i.e Debentures, Bonds, Derivatives, Government Securities etc.)
- Units of UTI (listed or unlisted)
- Units of Equity-Oriented Funds (Listed or Unlisted)
- Zero-Coupon Bonds (Listed or Unlisted)
- High Premium Equity Oriented ULIP
- Capital Gains Taxation on Investment in Equity Shares
- Gains made from long or short-term investing in equity shares are taxed as “Capital Gain”
- According to Ravi Singhal, CEO of GCL Broking, if an investor sells listed equity shares within 12 months after buying then the buyer is reported to have either short-term capital gains (STCG) or short-term capital losses (STCL).
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The STCG is taxed at the rate of 15% under Section 111A, regardless of the tax bracket of the assessee, plus any applicable surcharges and cess.
In case, the assessee sells listed stock shares after 12 months of acquisition then the s/he is reported to have incurred either LTCG or Long Term Capital Loss (LTCL).
Singhal says that if a seller earns an LTCG of over Rs 1 lakh on the sale of equity shares or equity-oriented mutual fund units, then the gain is taxed at the rate of 10% plus any relevant cess but without the benefit of indexation. (Know more about how to calculate STCG or LTCG tax here).
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According to tax experts, LTCG of up to Rs 1 lakh is exempted from tax in a fiscal year if equity shares and equity mutual funds (MFs) are sold after being held for one year or more.
The Government recently changed the rules for the taxation of investments in debt mutual funds. Accordingly, investing in debt funds that do not have more than 35% of their AUM invested in equity will not qualify for LTCG benefit and will be taxed at the investor’s slab rate. The rule will apply to international funds, gold funds, hybrid funds and also domestic equity funds of funds (FoFs).
