The proposed exercise is anticipated to start with the direct tax task force report from 2019.
The government is reportedly considering various possible ways to simplify the capital gains tax regime. As per a report by the Economic Times, this also includes rationalising the multiple holding periods. It adds that in considering these changes, the parity within asset classes will play a crucial factor, which may even take tax rate changes into account.
"The capital gains tax regime is slightly complex. There is a case for simplifying and rationalising it," the Economic Times quoted a government official as saying.
The official reportedly added that the proposed exercise is expected to start with the direct tax task force report from 2019. A final decision, however, is only expected to be made closer to the budget.
"There is a need to reduce the holding period (for classifying into a long-term capital asset) of financial products like bonds, debts funds, gold ETF to 24 months from 36 months." the Economic Times quoted Vishwas Panjiar, partner, Nangia Andersen LLP.
As per the report, the task group is led by Akhilesh Ranjan a former member of the Central Board of Direct Taxes (CBDT). The group reportedly suggested three kinds of assets - equity, non-equity financial assets, and all other assets, including property. However, with the exception of equities, it reportedly offered indexation benefits for all categories.
As per the report, the panel proposed a long-term capital gains (LTCG) tax of 10 per cent on profits from the sale of equity assets that are held for more than a year. Moreover, an LTCG of 20 per cent with indexation was also reportedly suggested for gains on sale for non-equity financial assets which are held for more than 24 months. The report enlisted that a 20 per cent tax with indexation on profits on sale after holding them for 36 months was also proposed.