Skip to main content

Tax Reforms: Capital Gains

A person would need to pay higher taxes on profits made from sale of an asset, according to the draft Direct Tax Code

You can expect significant changes regarding the computation of your capital gains tax once the Direct Tax Code (DTC) comes into effect from April 1, 2011.

DTC IMPACT

Capital gain would be taxable as income from ordinary sources at slab rates applicable to different income brackets. In other words, an individual falling under 30 per cent bracket pays longterm capital gains (LTCG) tax at 20 per cent. But, such individual may end up paying tax at 30 per cent under the DTC regime.

The benefit of indexation is proposed to be provided in respect of assets transferred after one year from the end of the financial year in which it is purchased. In case of listed equity shares or units of an equity-oriented fund a deduction, at a specified percentage of capital gains would be allowed from the gains arising from transfer of such securities. In other words, under the DTC, LTCG and short-term capital gains (STCG) tax from such securities would get taxed at the normal applicable slab rates which are presently either exempt in case of LTCG or taxed at 15 per cent in case of STCG.

The current date of considering the fair market value as on April 1, 1981 is proposed to be advanced to April 1, 2000.

No similar provision in DTC for making investment is specified for securities which are currently available under Section 54EC.

CURRENT PROVISIONS

Lets understand the current tax norms for capital gains are: Any gain arising on sale of capital assets is taxed under the head capital gains. The tax incidence depends on whether the gain is STCG or LTCG, depending on the holding period.

STCG arises where the asset sold is held by the individual for aperiod up to three years (oneyear for equity and related investments, debt instruments and UTI) from the date of its acquisition. However, LTCG is levied where the holding period exceeds three years (one-year for equity and related investments, debt instruments and UTI).

HOW TO COMPUTE

The cost of acquisition and improvement of the asset along with the expenses incurred at the time of sale of the asset are deducted from the sale consideration.

However, in case of LTCG an individual is extended the benefit of indexation except in few cases (especially equity and related investments). Further, in case of a property, an individual has an option to substitute the original cost of the property with the fair market value as on April 1, 1981, where the individual acquired the property prior to such date.

TAX RATES

In STCG, the gains are clubbed with the person's income and taxed as per the income tax slab, he/she falls under. LTCG is taxed at a flat rate of 20 per cent (plus education cess of 3 per cent) or 10 per cent with indexation benefit. In case of transfer of shares or units of equity-linked mutual funds on which Securities Transaction Tax (STT) is paid, STCG is taxed at 15 per cent (plus education cess), while LTCG is exempt.

TAX SAVINGS

Currently, to save on LTCG, one can make investments subject to the specified conditions as contained in the respective sections of the Income Tax Act, 1961(Act): LTCG arising on transfer of a residential house property is exempt if the same is reinvested in a new residential house (Section 54).

The gain arising on transfer of any long-term capital assets (LTCA) is exempt if the sale proceeds are invested in the notified bonds within a period of six months from the date of transfer. But, there is a cap of Rs 50 lakh for each year for making investment in such bonds (Section 54EC).

The capital gain arising on transfer of a LTCA other than a residential house is exempt if the same is reinvested in a new residential house (Section 54F).

However, one would need to wait for some more time to see the final print of DTC.

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
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