Finance Ministry wants to do a comprehensive review of capital gains tax regime and is open to tinker with it when it gets an opportunity to do so, Revenue Secretary Tarun Bajaj said on Wednesday. 

Addressing an interactive session with CII, Bajaj said “we need to really rework on the capital gains structure on everything including rates and the holding periods”.

Bajaj asked the Confederation of Indian Industry (CII) to undertake in the next three to four months a comprehensive study of the capital gains tax regime in developed and developing countries in terms of the rates and holding periods and submit a report to the revenue department. He highlighted that CII study can supplement the huge quantum of information that is already with the revenue department on the capital gains front. 

Bajaj noted that the capital gains tax regime in India have turned “too complicated” as different rates and different holding periods have been set for different sectors, asset classes and instruments like real estate and equities and InvITs. “For real estate we have made it 24 months, for shares we have made 12 months and InVIT is 36 months”, he noted. 

Capital Gains bounty

Bajaj highlighted that the government expects to get “good amount” of revenue from capital gains tax during this fiscal on the back of sharp rise in stock markets. 

“Inspite of the fact that capital gains tax rates are much lower at 10 per cent and 15 per cent on the stock market for short term and long term— we are expecting to make an estimated amount of ₹ 60,000-₹ 80,000 crore via capital gains this fiscal. Last year, this was about ₹ 6,000-₹ 8,000 crore. 

This has made huge difference to the budget projections on tax collections this fiscal. Now with US Fed tapering happening, one does not how markets will play in coming days or next fiscal”, he said. 

If corporate fundamentals are good, then markets should do well and so will capital gains tax collections next year as well, he added. 

GST rate on health insurance

On CII President -designate Sanjiv Bajaj’s suggestion that 18 per cent GST on health insurance was on the higher side and need to be reviewed, Bajaj urged CII to make this representation before the Bommai Committee, which is reviewing the GST rate structures and expected to submit its report in a month. 

Revenue Secretary also said that care should be taken to ensure that India does not go the way of the situation in the US where inflation and high insurance premiums have led to rise in healthcare costs. 

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