India Simplifies Capital Gains Tax Structure

Revenue Secretary Sanjay Malhotra clarified that the capital gains tax rationalization in the FY25 Budget is intended as a simplification measure rather than a means to increase revenue. The new tax regime introduces a one-year holding period for long-term capital gains (LTCG) on listed assets and a two-year period for unlisted assets, with a standardized LTCG tax rate of 12.5% across asset classes. This change aims to reduce compliance burdens, reflecting industry requests for simplification. The previous indexation benefit has been removed, and while there is a minor expected increase in revenue, the primary focus remains on easing tax processes. The new provisions will come into effect from July 23, 2024, and also ensure parity between resident and non-resident taxpayers. Overall, the modifications are designed to streamline capital gains taxation and enhance taxpayer compliance through clearer guidelines.