Capital Gains Tax Regime Needs Rework: Revenue Secretary Tarun Bajaj

Gains from sale of capital assets, both movable and immovable, are subject to ‘capital gains tax’ under the Income-Tax Act

New Delhi: Revenue Secretary Tarun Bajaj on Wednesday said that the central government is open to ‘some tinkering’ in the varied rates and holding period for computation of capital gains tax on shares, debt and immovable property, in a bid to make it simple as the structure has become complicated.

Gains from sale of capital assets, both movable and immovable, are subject to ‘capital gains tax’ under the Income-Tax (I-T) Act. However, the Act excludes movable personal assets such as cars, apparels, furniture from this tax.

The revenue secretary said the current capital gains tax structure is ‘too complicated’ in terms of varied rates and period of holding across the assets and hence needs a relook.

Addressing a session at CII event, Bajaj said, “We need to rework the capital gains structure for rates, holding period. We would be open to some tinkering in it the next time we get an opportunity.”

Asking the chamber to conduct a study on what are the prevailing rates of capital gains tax across the world, Bajaj said, the department has already studied the rates in other nations and the developed world.

He said, “Number one is rate and number two is the period for which it is. I think it is too complicated... that we have created. For real estate, we have made it 24 months, for shares 12 months, for debt it is 36 months. We need to work on that.”

There would be a segment of taxpayers who would stand as gainers, while there would be a segment who would lose out compared to their present tax provision, Bajaj said at the event, adding “that becomes the most difficult part”.

Depending upon the period of holding an asset, the long-term or short-term capital gains tax is levied. The Act provides for separate rates of taxes for both categories of gains. The method of computation also differs for both the categories.

In general, when an asset is held for more than 36 months, it is termed as a long-term asset, otherwise short-term.

However, equity shares or units of equity oriented mutual funds held over than 12 months are considered long-term, whereas house property has to be held for 24 months to be considered a long-term capital asset.