The biggest sigh of relief from Union Finance Minister Arun Jaitley’s Union Budget speech for the year 2017-18 has to be in the way Long Term Capital Gains has been left with little altercations.
With LTCG, people who had invested in the real estate were eligible for lower taxation if they sold the immovable asset before the holding period. With the passing of the union budget, the holding period has been reduced to two years, instead of three years. This could fairly assist in the computation of taxable capital gains on old assets.
However, in equity-based mutual fund schemes, the long-term period is defined as the duration of one year or more during which no tax is charged. This has been left untouched in the current iteration of the union budget. In the current format, equity investors are required to pay short-term capital gains (STCG) tax of 15 percent if it is held for less than one year. Besides this, the investors of the STCG type have to pay education cess at 2% and secondary and higher education cess at 1% on the tax amount.
For people planning to enter the market through the debt investments, the duration to qualify for long-term capital gains tax is three years or 36 months and if it is liquidated within that period then he/she becomes liable to be taxed as per the applicable income-tax slab. The Long-term capital gains tax on debt instruments is taxed at 20% which also includes indexation benefit on the cost.
The current iterations in the Long Term Capital Gains has been looking beneficial especially for the real-estate but due to the impositions of the additional condition for claiming tax-free capital gains from listed shares the scenario is not all that positive. The LTCG cannot be claimed on the shares acquired in the form of conversion from bonds, preference shares, etc.