Capital Gains Tax: After news reports suggested that there could be some tinkering in the tax structure, the Finance Ministry on Tuesday dismissed the claims. Clearing the air surrounding a revision in the capital gains tax structure, the ministry has stated that there is no discussion on capital gains tax.
News in some media agencies on tax tweak are “baseless” and there is no confirmation of any such news from the Finance Ministry, sources told ET NOW. As of now, there is no proposal to change any kind of taxes. Next year, there will be a vote on account, so any big incremental changes to the direct tax structure is unlikely to happen.
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There’s no immediate plan to change the capital gains tax structure, the sources added.
After the Union Budget 2023-24 announcement, Finance Minister Nirmala Sitharaman had told ET NOW why there was no change announced in the capital gains tax. She had said that the tax structure was changed in 2018 and it is far to early to introduce any kind of changes.
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ET NOW Managing Editor Nikunj Dalmia reflected upon why speculation about change in capital gains tax is there so much now. It’s because in the finance bill, the total indexation for debt mutual funds was changed. The Centre is giving an indication that direct tax reforms is something we are working on.
A lot of asset classes are now coming under same tax bracket so why should equity get preferrential treatment,” Dalmia said while explaining the government’s stance.
In March-end, with amendments to Finance Bill 2023, the Finance Ministry removed the tax benefit for the category, bringing such funds at par with fixed deposits. This means that debt mutual funds that do not have at least 35 per cent of their assets allocated to equity will no longer get the long-term tax benefit. The changes came into effect from April 1, 2023.
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Capital Gains – Short term and long term
Gain arising on transfer of capital asset is charged to tax under the head “Capital Gains”. Income from capital gains is classified as “Short Term Capital Gains” and “Long Term Capital Gains”. Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as short-term capital asset.
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Any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
