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As the Budget 2024 approaches, there is a growing interest and anticipation among taxpayers regarding potential changes in the capital gains tax policies. Over the years, there have been discussions and debates surrounding the complexity and rates of taxation on long-term capital gains, leading to a call for revisions in the legislation to bring about more clarity and lower tax burdens. One major aspect of capital gains tax that has been under scrutiny is the application of the long-term capital gains tax on different assets. The definition of ‘long term’ varies depending on the asset, such as land, stocks, or jewellery. For instance, the holding period for land is three years, while it is one year for equity assets. When it comes to securities and equity-oriented funds, the gains earned on shares sold one year after purchase are subject to long-term capital gains tax. The gains should exceed ₹1 lakh for the tax to apply, and the rate is 10 percent without indexation benefits. Unlisted shares, on the other hand, have a holding period of 24 months before being taxed under long-term capital gains. Similarly, land and building assets held for more than two years are taxed under long-term capital gains provisions, with indexation benefits available to reduce tax liability. Debt mutual funds, if held for a long period, are now subject to short-term capital gains tax at the slab rate, unlike earlier provisions. Gold and jewellery investments become liable for long-term capital gains tax when held for 36 months, with a tax rate of 20 percent. These nuances and variations in tax treatment for different asset classes highlight the need for clear guidelines and uniformity in tax structures. Experts and investors are hoping for a simplified and standardized capital gains tax regime through the upcoming Budget 2024. There are expectations for reforms that streamline holding periods, introduce uniformity in long-term/short-term rates, and possibly change base years for indexation to benefit the investor community. The dominance of the National Democratic Alliance government led by Narendra Modi underscores the significance of fiscal prudence and reform in capital gains taxation. Rationalizing and standardizing tax structures, introducing a more uniform approach to tax treatment across asset classes, and focusing on long-term sustainability of the tax system are key expectations from the upcoming budget. Overall, the forecasts for capital gains taxes under Budget 2024 are aimed at providing clarity and predictability to investors, while also ensuring that the tax system remains conducive for economic growth and investment opportunities. As taxpayers eagerly await the announcements on capital gains tax reforms, the Budget 2024 is poised to bring about significant changes in the nation’s tax landscape.
