The Government is all set to tweak the Long Term Capital Gain Tax (LTCG) norms as announced in the Budget, by providing a special grandfathering norm. The new mechanism will be unveiled by Finance Minister Nirmala Sitharaman when she replies to the debate on the Finance Bill on Wednesday.
According to officials, one of the key amendments set the date of July 23, 2024, as the date of grandfathering. “In the case of transfer of a long-term capital asset, being land or building or both, by an individual or HuF (Hindu Undivided Family), which is acquired before the July 23, 2024, the taxpayer can compute his taxes under the new scheme [@12.5 per cent without indexation] and old scheme [@20 per cent with indexation] and pay such tax which is lower of the two,” a source explained.
As a part of capital gain rationalisation, the budget proposed raising the rate for short-term capital gain on STT paid equity shares, units of equity oriented mutual fund and unit of a business trust to 20 per cent from 15 per cent. The rate of long-term capital gains was proposed to be raised to 12.5 per cent in respect of all categories of assets. This rate earlier was 10 per cent for STT paid listed equity shares, units of equity-oriented fund and business trust and for other assets such as real estate and gold, it was 20 per cent with indexation.
“Simultaneously with rationalisation of rate to 12.5%, indexation is proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold and other unlisted assets. This will ease computation of capital gains for the taxpayer and the tax administration,” the budget document said. Along with these changes, it was also proposed that there will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains.
All these changes were key points during the debate to General Budget as well as Finance Bill in Lok Sabha. Members of all opposition parties demanded change in LTCG norms especially for real estate. Sources also said that there were demand from ruling coalition also, which prompted the government to tweak the norms. Some tweaking regarding shares and bonds also expected.