Industry renews its demand for of taxes on capital gains overhaul

WITH THE INTERIM Budget to be presented in February, industry bodies and tax experts are learnt to have approached the government for a thorough review of the capital gains tax structure.

- PRIYANSH VERMA

According to sources, the government has received proposals from industry to simplify the tax structure and bring parity among tax rates and holding periods for different asset classes.

The move follows top government functionaries saying in public on many occasions that the tax structure for capital gains needs to be simplified, with a view to reducing arbitrage among asset classes.

"The government aims to align the tax rates and holding periods for equity, debt, and immovable property investments," a source said. To simplify the structure, experts say the government should bring in uniformity in tax rates and consistency in the classification of assets as long term or short-term, based on the period of their holding.

Currently the issues plaguing the capital gains tax structure broadly are: non-uniformity of tax rates; different tax rates for different assets; and lack of indexation benefit for certain assets, such bonds as debentures (see chart).