CAPITAL GAINS TAX (CGT)
- ECONOMY
News: FM's clarification on capital
gains tax could see markets recover
What's in the news?
●
Finance Minister Nirmala Sitharaman has refuted
claims suggesting that the Income Tax Department intends to implement
alterations to the capital gains tax framework if the government secures
re-election in the ongoing Lok Sabha 2024 elections.
Capital Gains Tax (CGT):
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Capital gains refer to the profits obtained from the sale of any capital asset, including
land, buildings, vehicles, patents, trademarks, and machinery.
Inclusion of Assets:
●
Capital assets also encompass rights in or in
relation to an Indian company, as
well as rights of management, control, or any other legal entitlement.
Short-term vs. Long-term
Gains:
●
Capital gains are categorized as short-term or
long-term based on the duration for which the asset is held.
a. Short-term Capital
Gains:
●
Assets held for less than 36 months, or 24 months in the case of immovable
properties, are considered short-term.
●
Profits from the sale of short-term assets are
taxed as short-term capital gains.
b. Long-term Capital
Gains:
●
Assets held for over 36 months, or for more than a year in the case of certain
financial instruments like preference shares, equities, and mutual funds, are
categorized as long-term.
●
Profits from the sale of long-term assets are taxed
as long-term capital gains.
Taxation of Capital
Gains:
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Capital gains are treated as income and are subject to
taxation when an asset is transferred between owners.
●
Both individuals and businesses are liable to pay
capital gains tax (CGT).
Tax-efficient
Strategies:
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Taxpayers can employ tax-efficient financial
strategies to mitigate the burden of CGT and optimize their tax liabilities.