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

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. 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 10 Tax...

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

SBI Long Term Advantage Fund Series

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 10 Tax Saver Mutual Funds for 2017 - 2018 Best 10 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. ICICI Prudential Long Term Equity Fund 5. Birla Sun Life Tax Relief 96 6. Franklin India TaxShield  7. Reliance Tax Saver (ELSS) Fund 8. BNP Paribas Long Term Equity Fund 9. Axis Tax Saver Fund 10. Birla Sun Life Tax Plan 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 your comment with mail ID and we will answer them OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com OR Call us on 94 8300 8300  

BANK FDs for Tax Saving

This is probably the easiest way to save tax if you have a Netbanking account . After the demonetisation and the digital push, almost everyone has one. A few clicks of the mouse and your tax planning is done. However, as mentioned earlier, this convenience comes at a very high cost. Interest rates have come down significantly and are close to 7-7.5% right now. The bigger problem is that the interest is fully taxable. It is added to the income of the investor and taxed at the marginal rate applicable to him. In the highest 30% tax bracket , the post-tax yield is close to 5%. Even so, tax-saving fixed deposits are suitable for risk averse investors, especially senior citizens who might already have hit the ` 15 lakh ceiling in the Senior Citizens' Saving Scheme and don't want to lock in money for the long term in a PPF account . Though NSCs offer higher rates than most banks, many senior citizens prefer to invest in deposits of their own banks, because they get better service ...
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