Budget 2023-24: The last budget of the second term of the Modi government is going to be presented on February 1, 2023. It is believed that Finance Minister Nirmala Sitharaman can make a big announcement in this budget regarding the change in the rules of long term capital gain tax. In the budget, emphasis can be laid on rationalizing long-term capital gains tax, as well as change in the base year is also possible to give the benefit of indexation.
Equity investors are liable to long term capital gains tax on capital gains after the holding period of 12 months. Short term capital gains tax applies to capital gains held for less than a year. If the property is sold or unlisted shares are sold, long term capital gains tax is levied after 2 years. For jewelery and debt financial instruments, the 20% long-term capital gains tax rule applies after 3 years. It is believed that in the budget, both the holding period of the asset and the tax rate can be rationalized in capital gains tax.
Changes are also expected to be made in the base year for indexation calculation. Earlier in 2017, the base year was changed. At present, the benefit of indexation is decided on the basis of the year 2001. There has been a huge increase in the value of all assets in the last few years, due to which the need has arisen to change the base year of indexation.
According to an official, the purpose of this entire exercise is to simplify the capital gain structure and make it taxpayer friendly so that the burden of compliance can be reduced. This will help in bringing uniformity in tax rates and holding period within the same asset class. Under the Income Tax Act, there is a provision to levy capital gains tax on the sale of both movable and immovable capital assets. However, it does not include personal assets such as cars, apparel and furniture.
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Om Rajpurohit, director, AMRG & Associates, said that after 2004, many changes have been made in the rules of capital gains tax, due to which it has become very complicated. He said that it is possible that the government may divide the asset class into movable and immovable categories and keep the holding period in a single timeline.
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