Section 54F permits investment of consideration in maximum two properties and not more.
The finance ministry is looking at rationalising long-term capital gains tax structure by bringing parity between similar asset classes and revising the base year for computing indexation benefit to make it more relevant, an official said on Friday. Currently, shares held for more than one year attract a 10 per cent tax on long-term capital gains. Gains arising from sale of immovable property and unlisted shares held for more than 2 years and debt instruments and jewellery held for over 3 years attract 20 per cent long term capital gains tax.
Jaitley said returns from the stock market are quite attracting and it was time to bring them under the ambit of capital gains tax.
An argument used for removal of this exemption is that it is used to launder black money and bring it in as clean tax paid money by manipulating the price of less liquid shares in the market, says Harsh Roongta.
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'The estimates of tax forgone on this item run into hundreds of billions.' 'And there is neither fairness nor rationality to support continuing with this tax holiday for just one class of investors, those who put their money in shares,' says T N Ninan.
Jaitley assured that both the banking system and the government will make the resources available to them.
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'There is a huge tax differential of 15% to 20% depending on income classification.'
The income tax department on Wednesday issued FAQs on changes in the capital gains tax saying the idea behind it was to simplify the tax structure and promote ease of compliance. The holding period for various asset classes for the purpose of short- and long-term capital gains tax has been rationalised. The holding period of all listed assets will be now one year for the purpose of long-term capital gains tax (LTCG).
'Expectations are high regarding the change in LTCG with respect to equity investments.'
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Taxpayers seeking to save tax from the sale of gold (including inherited) should reinvest the capital gains in residential property to avail of the benefit provided by Section 54F.
The government on Wednesday imposed a limit of Rs 10 crore for deduction on long-term capital gain tax for reinvestment in residential properties under Section 54 and 54F of the Income Tax Act. These two sections deal with reinvestment of proceeds from sale of long-term assets (housing or other capital assets) to buy residential properties. "For better targeting of tax concessions and exemptions, I propose to cap deduction from capital gains on investment in residential houses under sections 54 and 54F to Rs 10 crore," Finance Minister Nirmala Sitharaman said in her Budget speech.
The Budget may tweak capital gains taxes levied on equity, debt and immovable property to bring parity in varied tax rates and holding period, a senior official said. Explaining the rationale, the official said there needs to have an alignment in tax rate and holding period for all the asset class. Changes in capital gain tax expected in Budget, the official said.
Transcript of the tax chat held on March 12.
Despite the Reserve Bank of India's (RBI) and the government's recent initiatives to attract foreign capital, which are expected to alleviate pressure on long-duration bonds, most debt fund managers are maintaining a cautious stance, favouring shorter-duration papers due to global uncertainties and potential future rate hikes.
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The Reserve Bank of India (RBI) and the central government have introduced a package of measures, including tax exemptions for FPIs on government securities and a concessional foreign-exchange swap facility, aiming to attract up to $50 billion in foreign capital. This initiative is designed to strengthen India's balance of payments and potentially cover the projected BoP gap for FY27.
Debt mutual funds are likely to be stripped of the long-term tax benefit if they invest less than 35 per cent of their assets in equities. Such mutual funds will attract short term capital gains tax. The government is likely to make such a proposal in the form of an amendment to the Finance Bill 2023 in the Parliament, sources said.
Higher levy on dividends earned by individuals also on radar.
With more granular reporting and enhanced data matching, mismatches are likely to be identified more quickly.
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"Taxpayers with income from shares, mutual funds, crypto, ESOPs, or derivatives often incorrectly use ITR-1 instead of ITR-2 or ITR-3."
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rediffGURU T S Khurana answers readers' personal income tax queries.
The tax treatment of equity savings funds makes them appealing, especially to investors in higher income-tax brackets.
The 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, revenue secretary Tarun Bajaj said on Wednesday. Under the Income Tax Act, gains from sale of capital assets, both movable and immovable, are subject to 'capital gains tax'. The Act, however, excludes movable personal assets such as cars, apparels, furniture from this tax.
The Indian government is set to accelerate reforms, including measures to enhance foreign direct investment, speed up divestment, and boost asset monetisation, to maintain economic growth despite rising fuel and fertiliser import costs driven by the West Asia crisis.
The Budget emerges as a measured, credible and forward-looking policy document that reinforces India's commitment to remaining a stable, reform-oriented economy amid an increasingly fragmented global landscape, says A Balasubramanian.
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rediffGURU Samkit Maniar answers readers' personal income tax queries.
Why would a country that requires close to $90 billion in net foreign capital annually to create jobs, build productive capacity, and sustain rapid growth permit $30 billion of capital to flow abroad, thereby contributing to pressure on the rupee? asks Debashis Basu.
'Genuine' share transfer gets relief; CBDT lists three scenarios where tax would be levied
Domestic institutional investors (DIIs), driven by the popularity of mutual funds, have emerged as significant stabilising forces for Indian capital markets amidst global volatility and foreign portfolio investment (FPI) outflows, according to Sebi whole-time member Amarjeet Singh.
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Ask rediffGURU and tax expert Mihir Tanna your income tax-related questions.
