Budget 2023 is just round the corner, and experts expect announcements for simplifying and rationalising the capital gains tax regime. “Capital gains tax is complicated, and the series of amendments over the years has resulted in various regimes for capital gains, which has made it more complex,” said Kunal Savani, Partner, Cyril Amarchand Mangaldas. In an exclusive interaction with FinancialExpress.com, Kunal Savani said that while capital gains are taxed based on the period of holding and the nature of the asset, there should be only one period of holding. “Given the globalisation and a lot of foreign investors and MNCs, there should be a simpler regime which entails same holdings for listed as well as unlisted shares. Assets could be classified on broader aspects and those can have similar kinds of holdings,” he said.
Listen to the conversation here:
Further, highlighting the differences between domestic and foreign capital gains taxation, Kunal Savani said that with the unlisted investment space picking up now, it’s time for the government to try to bring some parity in the taxation regime. Currently, the sale of listed equity shares or units of equity-oriented funds attracts a 10 per cent long-term capital gains (LTCG) tax and the holding period for the long term in this case is 12 months for both domestic and foreign investors. And the unlisted shares are subject to 20 per cent LTCG for residents even if they are holding assets for more than 24 months and 10 per cent for non-residents. This, he said, was done to attract more foreign investors to unlisted space. Not only this, non-residents can also avail treaty benefits, wherein they are not required to pay capital gains tax in India on certain assets.
The tax that is levied on capital gains is termed as capital gain tax. Such taxes are levied when an asset is transferred between owners. As of now, shares held for more than one year attract a 10 per cent LTCG tax. This tax was discontinued in 2005, but was reintroduced in 2018 in the Union Budget for that fiscal.
Will there be changes in personal tax slab rates?
India also expects changes or announcements regarding the personal tax slab rates in the upcoming Budget. “It is required and very much overdue,” said Kunal Savani. The tax rate for individuals has not witnessed any changes since FY 2017-18. The last change was introduced in 2020 with the announcement of ‘New Tax Regime’. “The ‘New Tax Regime’ didn’t have many takers. A lot of taxpayers are falling under the old tax regime and given the inflation, etc., while income might have increased but you continue to pay tax under the old slabs. The moment you cross Rs 5 lakh, you are no longer eligible to claim the relief. So, individuals are still shelling out more money,” he said. An announcement on the changes in the slab rates will give more purchasing power to people and the employed taxpayers.