Capital Gains Tax: Govt earned around Rs 99,000 cr on listed equities, MoS Finance tells Parliament

The NDA government has earned Rs 98,681 crore from long term capital gains tax on listed equities in 2022-23, which is about 15 per cent growth over the last year, Minister of State for Finance Pankaj Chaudhary told Rajya Sabha on Tuesday.

Chaudhury also shared collections from Long Term Capital Gains (LTCG) tax between fiscal 2018-19 and 2022-23 in the Rajya Sabha. The long term capital gains on equities and units of equity oriented mutual funds were brought in from April 2018. Such gains were taxed at 10 per cent, with gains of up to Rs 1 lakh annually being exempted.

As per the data, Rs 98,681.34 crore was collected from LTCG in 2022-23, up 15 per cent over Rs 86,075.49 crore collected in 2021-22 fiscal. The collection was about Rs 38,589 crore in 2020-21, Rs 26,008 crore in 2019-20 and Rs 29,220 crore in 2018-19.

Capital gains tax is a type of tax that is levied on the profits earned from selling capital assets like stocks, mutual funds, real estate, and gold. The tax rate is determined by the classification of the asset and how long it was held. In the Union Budget presented last week, FM Sitharaman introduced significant changes to the capital gains tax structure.

These changes included implementing a uniform long-term capital gains (LTCG) tax rate of 12.5% for all asset classes, thereby replacing the previous tiered system. Furthermore, the short-term capital gains (STCG) tax rate on equity-related investments was raised from 15% to 20%. Additionally, the tax-free limit for LTCG on equity investments was increased from Rs. 1 lakh to Rs. 1.25 lakh.

Earlier, equities were subjected to a 10% LTCG tax rate, whereas non-financial assets such as real estate and gold were taxed at a higher rate of 20% for LTCG.

Moreover, the revised tax policy altered the criteria for assets to qualify as long-term investments. For listed securities, the holding period was extended from 12 months to 24 months. Furthermore, the indexation benefit, which adjusted the purchase price of an asset for inflation, was eliminated under the new tax regulations.

The Centre tweaked the treatment of long-term capital gains (LTCG) in property transactions. Specifically, the indexation benefit has been eliminated, resulting in substantial modifications to the LTCG calculation.

(With agency inputs)