A report recently said that if PM Narendra Modi returns to power next year, the government is planning to change the country’s direct tax laws to help the prime minister reduce income disparity. (Representative image)
Capital gains tax is a tax levied on profit from the sale of property or an investment
Even as a media report said that India is preparing an overhaul of its direct tax laws and at the heart of the rework is potential increases in capital gains taxes for highest income earners, the income tax department said there is “no such proposal before the government on capital gains tax”.
“It is clarified that there is no such proposal before the Government on capital gains tax,” the income tax department said in a tweet.
A Bloomberg report recently said that if PM Narendra Modi returns to power next year, the government is planning to change the country’s direct tax laws to replace a byzantine matrix of rules and help the prime minister reduce income disparity.
It added that at the heart of the rework is potential increases in capital gains taxes for top income earners.
In the Budget 2023, the government provided relief to the salaried class by making an annual income up to Rs 7 lakh tax-free, apart from extending the benefit of standard deduction to new tax regime. Also, the government revamped the tax slabs under the new tax regime. The old tax regime was kept unchanged.
What Is Capital Gains Tax?
Capital gains tax is a tax levied on profit from the sale of property or an investment. Currently, capital gains tax in India is imposed on investment gains based on a lock-in or holding period. Investments in equity or equity-linked mutual funds for more than one year are considered as long-term, and attract a 10 per cent tax on gains of more than Rs 1 lakh. Investments in equity held up to one year are considered short-term and attract a 15 per cent tax.
Recently, the mutual fund-related amendment in the Finance Bill, 2023, imposed the short-term capital gains tax on specified mutual funds (where not more than 35 per cent is invested in equity shares of domestic companies) that were bought on or after April 1, 2023.
Before this, debt MFs were taxed based on the holding period. In case the debt mutual funds were held for more than three years, long-term capital gains tax was levied at 20 per cent with indexation benefits. However, if the debt MFs were held for a period less than three years, they were subject to short-term capital gains tax, which is levied as per the investor’s slab rate.
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