 |
|
The Union Budget 2024 has introduced a new capital gains tax regime in India, aiming to simplify the tax structure for investors. The new system consolidates various asset classes under streamlined tax rates and holding periods, replacing the previous complex system. While this change offers potential benefits in the long run, it has also sparked debate and confusion among investors during the transition period.
Mohit Gang, CEO of Moneyfront, acknowledges the initial discomfort associated with the new regime, emphasizing its long-term benefits. He highlights the simplicity of the new system, with only two tax slabs and two holding periods: 12 months for listed securities and 24 months for other assets. The tax rates are equally straightforward, with long-term capital gains (LTCG) taxed at 12.5% and short-term capital gains (STCG) at 20%.
Srivatsan Chari, Co-Founder of ClearTax, echoes Gang's sentiment on simplification but adds another layer to the analysis. He believes the government's intention is to promote increased market liquidity. The new regime encourages money movement from the equity markets into more stable, fixed assets, such as bank deposits. This shift towards fixed assets is beneficial for long-term investors, Chari notes.
The standardisation of the LTCG tax rate at 12.5% for all assets simplifies the tax computation process, especially for long-term investors. However, the higher STCG tax rates may require short-term investors to reassess their strategies. Short-term investors need to carefully evaluate the risks and potential returns before making decisions in the new regime. The new regime, while aimed at simplifying the tax system, presents both opportunities and challenges for investors. Long-term investors may find the new system more straightforward and beneficial, while short-term investors need to adapt their strategies to account for the higher STCG tax rates.
Source: New capital gains tax regime to be beneficial in long term, says expert