‘Capital gains tax from shares: ’60K-80K crore mop-up probably’

In an nearly 10-fold enhance in tax collections from inventory markets, the federal government is anticipating to gather Rs 60,000-80,000 crore this 12 months as tax on “capital gains in the stock markets” as towards Rs 6,000-8,000 crore within the earlier fiscal.
Revenue Secretary Tarun Bajaj on Wednesday stated the federal government is estimating a “good amount” from the tax levy on capital positive factors regardless of a low tax fee for lengthy and quick phrases, including the federal government is open to ‘some tinkering’ within the different charges and holding interval for computation of capital positive factors tax on shares, debt and immovable property.
“We are going to get a good amount of revenue from capital gains tax despite the fact that capital gains tax rates are much lower at 10 per cent and 15 per cent on the stock markets for long-term and short-term (respectively). We are making an estimate, it should be between Rs 60,000-80,000 crore. Last year, it was about Rs 6,000-8000 crore. That has made a huge difference. Now, with the tapering happening and rates likely to go up in the US and (with) money moving out, one does not know how the market is going to play,” Bajaj stated.
At an estimate of Rs 80,000 crore for capital positive factors tax levy, this is able to suggest nearly 6.4 per cent of the whole direct tax collections of Rs 12.5 lakh crore estimated within the revised estimates for 2021-22.
Bajaj stated the present capital positive factors tax construction is “too complicated” when it comes to different charges and interval of holding throughout the belongings and therefore wants a relook. “We need to rework the capital gains structure for rates, holding periods. We would be open to some tinkering in it, the next time we get an opportunity,” Bajaj stated at a Confederation of Indian Industry occasion.
“Number one is rate and number two is the period for which it is. I think it is too complicated… that we have created. For real estate, we have made it 24 months, for shares 12 months, for debt it is 36 months. We need to work on that,” Bajaj added.
Whenever any such tinkering is caused, there can be a phase of taxpayers who would stand as gainers whereas there can be a phase who would lose out, in comparison with their current tax provision and “that becomes the most difficult part”, he stated.
Under the Income Tax Act, positive factors from sale of capital belongings, each movable and immovable, are topic to ‘capital gains tax’. The Act, nevertheless, excludes movable private belongings comparable to automobiles, apparels, furnishings from this tax. Short-term capital positive factors are chargeable to tax at regular slab charges relevant to the taxpayer, besides the place such acquire is arising from sale of fairness shares in an organization or models of fairness oriented mutual fund or unit of a enterprise belief (the place STT has been paid), which is chargeable to tax on the fee of 15 per cent, whereas long-term capital positive factors in extra of Rs 1 lakh for fairness is taxed at 10 per cent.
Pointing to the hole between present income impartial fee below the GST at 11.6 per cent towards 15.3 per cent earlier, Bajaj stated a fee rejig will happen the place charges will go down and different aspect as properly, hinting at a fee hike. He additionally stated that with the compensation regime coming to an finish in June this 12 months, states will face a large shortfall of funds, round Rs 1 lakh crore total.