On 23 July 2024, the Finance Minister delivered her speech on the 7th Union Budget, which made it clear that the existing Income-tax Act has to be reviewed in its totality, which, it was assured, will be done within the next six months.
Having been given this assurance, one would have thought that more has not been done in order to ensure stability of the tax regime. As against these expectations, the Finance Bill has provided over 80 substantive amendments to the Income-tax Act, 1961.
Currently, the government is considering the elimination of three categories of holding periods; instead, there will be just two, 12 months and 24 months, that will distinguish between how the gains gotten will be classified.
The minimum holding period with regard to the listed securities shall be twelve (12) months, while for any other asset that is not a listed security, the minimum period of holding shall be twenty-four (24) months for unlisted shares and immovable property.
Finance Bill 2024 has been crafted such that the rate of long-term capital gains will be the same across all kinds of assets and will be 12.5%.
At the present time, gains arising out of the sale of securities on which Securities Transaction Tax (STT) is chargeable are taxed at the rate of 10% where such sale is made after holding the securities for more than and inclusive of thirty-six months or such other period as the Centre may by notification and subject to satisfaction to such conditions and limitations as the Centre may specify in that behalf, and other long-term capital gains are taxed at 20%.
In the case of STT pertaining to short-term capital gains on such assets as shares of an equity-oriented company, units of an equity-oriented mutual fund, or units of a business trust, the proposed rate shall be 20% as against the current rate of 15%.
The rest of the charges arising from other short-term capital gains shall continue to be taxed at the appropriate level of tax.
To “alleviate the computation of capital gains for the taxpayer and the tax administration,” the Finance Minister proposes withdrawing indexation benefits available for a property, gold, and other unlisted assets; indexation allows, for instance, a taxpayer to increase the cost of a property acquired a long time ago based on the latest SAC for computation of CGT.
