In an almost Multiplication by 10 of tax collections on the stock markets, the government expects to collect Rs 60,000-80,000 crore in this fiscal year as capital gains tax on stock markets, up from Rs 6,000-8,000 crore in the fiscal year. previous. Revenue Secretary Tarun Bajaj said the government estimated a “good amount” of capital gains tax despite low long-term and short-term tax rates, adding that the government was open to “some DIYs” in various rates and holding period for calculating capital gains tax on shares, debts and real estate.
Increase in capital gains tax recoveries
At an estimate of Rs 80,000 crore in capital gains tax, this means almost 6.4% of total direct tax collections of Rs 12.5 lakh crore were estimated in the revised statistics for 2021 -2022.
“We are going to get a good income from capital gains tax despite the fact that capital gains tax rates are well below 10% and 15% in the long-term and short-term stock markets. (respectively). We make an estimate, it should be between Rs 60,000-80,000 crore. Last year it was around Rs 6,000-8000 crore. It has made a huge difference. Now with the gradual reduction and rates likely to rise in the US and (with) the money coming out, it’s unclear how the market will play out,” Bajaj said Wednesday at a Confederation of Indian Industry event.
Bajaj said the current capital gains tax structure is “too complicated” in terms of varying rates and length of time assets are held and therefore needs an overhaul. “We need to rework the capital gains structure for rates, holding periods. We would be open to some tweaks, the next time we get the chance,” Bajaj said.
“The first is the rate and the second is the period for which it is. I think it’s too complicated…that we have created. For real estate we have set it at 24 months, for equities at 12 month, for the debt at 36 months. We have to work on that,” Bajaj added.
Every time such a tinkering is done, there would be a segment of taxpayers who would be winners while there would be a segment who would be losers, relative to their current tax arrangement and “that becomes the hardest part”, did he declare.
Capital gains tax
Under income tax law, gains from the sale of fixed assets, both movable and immovable, are subject to “capital gains tax”. Movable property such as cars, clothes, furniture are excluded from this tax.
In the budget for 2018-2019, the government had introduced a tax on long-term capital gains exceeding Rs 1 lakh at the rate of 10% without allowing the benefit of any indexation, but with rights acquired until 31 January 2018. “Given grandfathering, this capital gains tax change will bring a marginal income gain of around Rs 20,000 crores in the first year. Income in subsequent years could be higher,” had said then-finance minister Arun Jaitley in his 2018 budget speech.
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Stocks or units of equity-oriented mutual funds held for more than 12 months are considered long-term, while real estate held for 24 months is considered long-term capital property.
Short-term capital gains are taxable at the normal rates applicable to the taxpayer, unless such gains result from the sale of shares of a company or units of equity-oriented mutual funds or units from a business trust (when STT has been paid), which attracts 15% tax, while long-term capital gains above Rs 1 lakh for equity are taxed at 10%. The budget for 2022-23 introduced a surtax cap of 15% for long-term capital gains on all types of assets, regardless of the capital gain. Currently, the surtax is capped at 15% only for long-term capital gains on listed shares or a unit of an equity-oriented mutual fund or a unit of a business trust and other long-term capital gains are subject to a graduated surcharge of up to 37 percent.