Capital gains tax must be rationalised; need simpler ITR form: Experts

NEW DELHI: The Budget should bring in a simpler income tax return form for assessees having only capital gains or dividend or interest income, along with simplification of the capital gains tax regime, experts said.

Under the income tax law, gains arising on the transfer of capital assets - both movable and immovable - are charged to tax under the head ‘Capital Gains’. The tax rate is different for different asset classes.

Also, depending on the period of holding, the income is classified as short or long-term capital gains and taxed accordingly. With capital markets in India growing at an exponential pace and companies taking the IPO route to raise funds, there is widespread demand that the capital gains tax structure be streamlined.

Deloitte India partner Rohinton Sidhwa said the holding periods for different types of assets and the number of tax rates for different types of capital assets should be reduced to a maximum of 1-2 periods or rates (along with related surcharges).

“Economic and commercial rationale dictates that the set-off of all capital losses (particularly long-term capital loss against short-term capital gains) be allowed seamlessly. Finally, the introduction of a single and simpler tax return for assessees (resident & non-residents) earning only capital gains/ dividend/ interest income would go a long way in easing filing challenges,” Sidhwa said.

The Finance Ministry is already working on a user-friendly common income tax return form for all taxpayers and an announcement to this effect is expected in the 2023-24 Budget to be unveiled on February 1.

Nangia Andersen LLP, tax leader, Aravind Srivatsan said many start-ups redomiciling to India and investors across the board have made representations on capital gains regime to be on par with global regimes.