India is planning changes to its capital gains tax structure in the next budget, seeking to bring parity among tax rates and holding periods for investments across equity, debt and immovable property.
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Currently, asset classes are not taxed uniformly and have different holding periods for levying capital gains tax, which needs to be aligned, an official involved in the process said on condition of anonymity.
The government has received several proposals from the industry to simplify the capital gains tax structure, and changes are expected in the Budget for 2023/24, the official said without disclosing more details as discussions are confidential.
India taxes investment gains based on a lock-in or holding period. Investments in equity or equity-linked mutual funds for more than one year are considered as long-term, and attract a 10% tax on gains of more than ₹1,00,000. Investments in equity held up to one year are considered short-term and attract a 15% tax.
Investment in debt-oriented funds is considered long term if held for at least three years, while immovable property such as land needs to be held for at least two years to be categorised as long-term, and gains are taxed at 20%. Investment in a property held for less than two years is considered short-term and taxed at the income tax rate applicable to an individual.