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‘Govt Open to some Tinkering in Capital Gains Tax Regime’

The government is open to “some tinkering” in the capital gains tax regime to Make it is simpler, revenue secretary Tarun Bajaj said on Wednesday.

The official projected a ten-fold rise in capital gains tax in the current fiscal over the previous year and said the government is open to the idea of a higher goods and services tax (GST) for restaurants that would allow them to claim input tax credit.

“We need to rework the capital gains structure for rates, (and) holding periods. We would be open to some tinkering in it the next time we get an opportunity,” Bajaj said at a post-budget event organized by the industry body CII.

Under the I-T Act, gains from sale of capital assets, both movable and immovable, are subject to capital gains tax. The Act provides for separate rates of taxes for long-term and short-term capital gains, based on the period of holding an asset.

“I think it is too complicated for real estate, we have made it 24 months, for shares 12 months, for debit it is 36 months,” Bajaj said, agreeing with the need for a simpler regime. “We need to work that.”

Bajaj asked CII to study the prevailing rates of capital gains tax across the world, saying the department had already surveyed the rates in developed nations.

He said the government is likely to collect good revenue through capital gains tax in the current fiscal on the back of a buoyant and active stock market. “We are making an estimate that it should be between Rs 60,000-80000 crore. Last year it was about Rs6000-8000 crore,” he said.

“Now with the tapering (reduction of assets purchases by the US Federal Reserve) 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 said.

Movable personal assets such as cars, apparel, and furniture are excluded from capital gains tax. S-ET

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