Budget 2020: Uniform LTCG Spell For Equity, Property, Gold Likely

This will be a major policy intervention as currently the LTCG for equities is 1 year, 2 years for property and 3 years for gold. Though it is not yet known, the tax treatment for LTCG may also see the consequent changes

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New Delhi: In a major move, the government is likely to stipulate a uniform framework for all asset classes - equity, property and gold - for computation of capital gains. Among the proposals being considered for the Union Budget is that the long term capital gains (LTCG) tax will be fixed at 24 months or two years uniformly for all asset classes. This will be a major policy intervention as currently the LTCG for equities is 1 year, 2 years for property and 3 years for gold. Though it is not yet known, the tax treatment for LTCG may also see the consequent changes. These asset classes more or less are the bulwark of the investment ecosystem in the country and a standard LTCG computation would introduce transparency and provide more clarity and simplicity of the regime for investors. On gold, long term capital gains after sale of gold kicks in after 3 years and is levied at 20 per cent plus indexation benefits. The short term capital gains is levied at sale of gold on a time duration of less than 3 years and is levied as per the tax slab of the assessee. Profit from sale of gold bars, jewellery, coins or utensils or any other form of precious metal attracts tax under capital gains. The profit on sale of gold holding is taxable under the head "Capital Gains" of Income Tax. The only exception to this is in case of gold dealers who transact in gold as a part of their business, where profit on such transactions is taxable under the head "Income from business or profession". On property, currently, if property is sold within 24 months, one has to pay a short term capital gains tax (STCG) on the gains as per an individual's income tax slab. After 24 months, one has to pay an LTCG tax, which is charged at 20 per cent with indexation benefits. Section 54 gives an exemption if there is sale of a property and then another one is bought. This exemption under section 54 is available when the capital gains from property sale are reinvested into buying or constructing maximum two houses. However, the capital gains on the sale of house property must not exceed Rs 2 crore in order to claim exemption for reinvesting in two properties. This benefit can be claimed only once in the lifetime. The exemption will be reversed if this new property is sold within three years of purchase and capital gains from sale of the new property will be taxed as short-term capital gains. The new properties must be purchased either one year before the sale or two years after the sale of the property. Alternatively, the new residential properties must be constructed within three years of sale of the property. In a move that will fire up the stock markets, the government is likely to extend the timeline of long term capital gains (LTCG) on shares from the current 12 months to 24 months. Currently, LTCG of 20 per cent is paid by domestic investors if they hold equity for 12 months, and 10 per cent is charged to non-residents if they hold equity for 12 months.