Skip to main content

New changes in capital gains tax

 



ONE of the important mid- to long-term investment avenues where individuals invest their savings is equity and mutual funds. Also, Employee Stock Option Plans (ESOPs) have been used as an important tool by the companies, especially the start-up businesses and unlisted companies planning to go for IPO in near future, to attract, retain and motivate employees. One of the key attractions in respect of the equity shares/specified securities listed in a stock exchange is the nil/lower tax rate in comparison with other investment assets. This is, however, set to change in view of the revised discussion paper on Direct Taxes Code.

Long-Term Capital Gains

If shares are held by the tax payer for more than 12 months, then gains arising from their sale/transfer are treated as long term capital gains. If the period of holding is lower, then such gain is treated as short term capital gains.

   Long term capital gains arising from the sale of shares listed on a stock exchange in India on which Security Transaction Tax (STT) is paid are not subject to tax. While short term capital gains arising in case of listed shares on which STT is paid are subject to tax at a concessional rate of 15% plus education cess.

   In case of unlisted shares, the long term capital gains are taxed at a concessional rate of 20% plus education cess. While the shortterm capital gains are taxed at the applicable rate i.e. as per the slab rate applicable to the individuals.

   As per the revised discussion paper on Direct Taxes Code, capital gains is to be treated as income from ordinary sources and taxed at the applicable rates, as below:


   (i) Listed shares: In case of equity shares listed on a recognised stock exchange, which are held for more than one year from the end of the financial year in which these are acquired, the capital gains shall be computed after allowing a deduction at a specified percentage of such gains without any indexation. Thus, it would reduce the effective tax rate in case of long term capital gains.

   (ii) Unlisted shares: In case of long-term capital gains arising in case of unlisted shares, the base rate for determining the cost of acquisition is proposed to be shifted from 1 April 1981 to 1 April 2000. The capital gains will be computed after allowing indexation on this raised base. The capital gains on such assets will be included in the total income of the tax payer and will be taxed at the applicable rate.

Short-Term Capital Gains

In case of short-term capital gains arising from any investment asset held for less than one year from the end of the financial year in which these are acquired, the capital gains shall be computed without any specified reduction or indexation benefit. Such capital gains will be included in total income of the tax payer and will be charged to tax at the rate applicable to the tax payer.

Stt To Continue

Further, the STT is proposed to be continued albeit in a calibrated manner to be specified, being a tax on the transaction.

Important To Note

It is important to note that it is proposed to tax capital gains whether long-term or short term, listed or unlisted, as per the method/rates to be prescribed. Therefore, individual investors who have invested in the equities or equity-oriented funds need to analyse the impact of the proposed changes on their portfolio as the capital gains arising from sale of shares would now be subject to tax in all cases including those of listed shares. Similarly, the stock option schemes, especially those of unlisted companies, may require a re-evaluation as the long-term capital gains after IPO would now be subject to tax in the hands of the employees.

 

Popular posts from this blog

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...

Save Tax With Mutual Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300       Mutual funds are ideal as long term investment avenues for retail investors. To encourage investments in this avenue, the Government of India offers investors a spate of tax benefits thus ensuring maximum benefit from mutual funds held beyond a year. Sample some of the key benefits and refer to the table for a detailed list of tax rates for different types of schemes ·        Avail deductions under Sec 80C of the Income Tax Act by investing up to a maximum of Rs. 1 lakh in designated Equity Linked Savings Schemes (ELSS). Such investments have a compulsory lock in period of 3 years. ·        First time retail investors in equity with a gross total income of up to Rs. 12 lakh can invest up to Rs. 50,000 in specific MF schemes un...

Compared to Bank FDs, Debt Mutual Funds are more Tax-Efficient

It is a security vis-a-vis returns battle between bank fixed deposits and debt funds In the past few months, banks have been consistently increasing their rates of interest on different fixed deposits. And after the Reserve Bank of India's Annual Monetary Policy, even the saving deposit rates are up at 4 per cent. For a six-month fixed deposit, you can easily get a rate of anywhere between 6 and 7 per cent annually. However, experts feel if one is looking to invest for less than a year, debt funds could make a better choice. The reason: Liquid funds and ultra short-term funds are giving annualised returns of 8 per cent. Financial advisors suggest retail investors opt for mutual fund schemes as they are more flexible and give higher post-tax returns. Opt for fixed deposits only if you are comfortable being locked-in for the tenure as a premature exit can attract a penalty. If your main aim is to ensure liquidity, debt funds are preferable. Though a fixed deposit gives you a...

Reliance Health Total

  Reliance Life Insurance has launched Reliance Health Total, a non-linked, non-participating and non-variable health insurance plan . It provides a fixed benefit cover for hospitalisation, critical illnesses and surgeries. The customer can also make a claim for over-the-counter health-related expenses. This is a regular-pay, five-year plan that can be renewed till the age of 99. The plan comes with two options: customers can choose a higher medical reimbursement benefit or a higher sum insured. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - I...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now