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By:

Abhijit Mulye

21 August 2024 at 11:29:11 am

Govt assures swift UCC implementation

Mumbai: Maharashtra government unequivocally declared its commitment to implementing the Uniform Civil Code across the state, assuring the legislative assembly that a comprehensive legal framework is already in the advanced stages of formulation. Minister of State for Home Yogesh Kadam categorically stated on the floor of the House on Tuesday that the ruling Mahayuti administration is entirely positive about the swift introduction of the Uniform Civil Code to standardize personal laws. To...

Govt assures swift UCC implementation

Mumbai: Maharashtra government unequivocally declared its commitment to implementing the Uniform Civil Code across the state, assuring the legislative assembly that a comprehensive legal framework is already in the advanced stages of formulation. Minister of State for Home Yogesh Kadam categorically stated on the floor of the House on Tuesday that the ruling Mahayuti administration is entirely positive about the swift introduction of the Uniform Civil Code to standardize personal laws. To facilitate this monumental legislative transition, the state government has formally sanctioned the constitution of a dedicated expert committee, which is being spearheaded by a retired High Court judge. This committee has been entrusted with the critical responsibility of meticulously preparing the draft bill for the Uniform Civil Code, which the government intends to enact immediately upon the submission of the final report. Emphasising the overarching objectives of the proposed legislation, Kadam noted that the Uniform Civil Code would universally apply to every citizen irrespective of their religious affiliations and would explicitly incorporate a stringent ban on the controversial practice of polygamy. The minister drew direct parallels with the legislative measures recently adopted by states like Uttarakhand, underscoring that the impending law in Maharashtra would similarly entail severe penal consequences, potentially including imprisonment for up to seven years for violations related to polygamy and illegal divorce practices. He firmly maintained that the government’s approach is fundamentally secular, harboring no animosity toward any specific religion, but is rather driven by the constitutional imperative to extend equal rights, legal protection, and comprehensive justice to women from all communities. This definitive policy assurance from the government was catalysed by a highly volatile calling attention motion initiated by BJP legislator Devyani Farande, which thrust the deeply sensitive issues of triple talaq and polygamy into the center of the assembly’s monsoon session. Farande brought the ongoing plight of Muslim women to the immediate attention of the House, asserting that despite the central government’s strict legislative prohibition, the illegal practice of instant divorce continues to flourish unabated.

Capital Gains Made Simple: A Guide to the New Tax Rules

With the new capital gains rules in place, understanding tax rates and holding periods has become crucial in determining what investors finally take home.

Over the last few years, investments in shares and mutual funds have increased significantly among Indian taxpayers. While these instruments offer attractive returns, the taxation of capital gains often creates confusion, particularly following the recent government changes. As a chartered accountant, I frequently encounter investors who earn good returns but lose a portion of them due to a lack of clarity on tax rules. This article breaks down the latest capital gains tax provisions in a simple, practical manner to help investors retain more of what they earn. To begin with, it is important to understand what capital gains actually mean.


What is capital gains? Capital gain arises when a capital asset, such as shares or mutual fund units, is sold at a price higher than its cost of acquisition. The profit earned is treated as a capital gain and is taxable under the Income-tax Act, 1961. Capital gains are classified into short-term or long-term depending on the holding period of the asset.


This classification is extremely important, as the tax rate differs significantly between short-term and long-term gains.


Short-Term Capital Gains

When equity shares or equity-orientated mutual fund units are sold within 12 months from the date of purchase, the resulting profit is treated as Short-Term Capital Gain (STCG).


As per the recent changes, short-term capital gains on such equity investments are now taxed at 20 per cent. Earlier, this rate was 15 per cent, but the increase aims to discourage excessive short-term trading and bring stability to the markets.


This means investors engaging in frequent buying and selling of shares or mutual funds must now factor in a higher tax outgo while calculating their net returns. After adding the surcharge, health, and education cess, the effective tax impact becomes even higher.


Long-Term Capital Gains

If equity shares or equity-orientated mutual fund units are held for more than 12 months, the gains qualify as Long-Term Capital Gains (LTCG).


Under the revised provisions, long-term capital gains exceeding Rs 1.25 lakh in a financial year are taxed at 12.5 per cent. Gains up to Rs 1.25 lakh remain exempt from tax.


Earlier, the exemption limit was lower and the tax rate was 10 per cent. The increase in exemptions provides relief to small and medium investors, while the slightly higher rate applies to higher gains. It is important to note that indexation benefit is not available on equity investments while computing long-term capital gains.


Mutual Fund Taxation

Equity mutual funds follow the same tax rules as equity shares, provided they invest at least 65 per cent of their corpus in equity instruments.


Debt mutual funds, however, have witnessed a significant change. Earlier, long-term gains on debt funds enjoyed indexation benefits, which reduced tax liability substantially. Under the current provisions, long-term capital gains on debt mutual funds are taxed at 12.5 per cent without indexation.


This change has reduced the tax advantage of debt mutual funds and makes careful investment planning essential, especially for conservative investors.


Practical illustration

Consider an investor who purchases shares for Rs 4 lakh and sells them after two years for Rs 7 lakh. The total gain is Rs 3 lakh. Out of this, Rs.1.25 lakh is exempt, and the balance of Rs 1.75 lakh is taxed at 12.5 per cent.


In another case, if the same shares are sold within eight months with a gain of Rs 1 lakh, the entire amount is taxable at 20 per cent as a short-term capital gain.


These examples clearly show the tax benefit of long-term holding.


Compliance and Reporting

Capital gains must be properly reported on the income tax return under the appropriate schedule. Investors should maintain records of purchase dates, sale dates, and transaction values. Incorrect reporting or non-disclosure may lead to notices, interest, and penalties.


It is also advisable to review capital gains periodically during the year to make informed decisions regarding the timing of sale and utilisation of exemption limits.


The recent changes in capital gains taxation reflect the government’s intention to simplify the tax structure and encourage long-term investing. While short-term investors now face higher tax rates, long-term investors benefit from a higher exemption limit and predictable taxation.


From a professional perspective, investors should align their investment strategy not only with market returns but also with tax efficiency. A proper understanding of capital gains tax rules, disciplined holding periods, and timely compliance can significantly improve post-tax returns and prevent unnecessary tax burdens.

 

(The writer is a Chartered Accountant based in Thane. Views personal.)


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