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Long term capital gain surcharge capped at 15% for all assets, how will it impact you

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Among the few reliefs which individual taxpayers got in this budget, the capping of surcharge to 15% on long term capital gains on all types of assets irrespective of the capital gain amount, is a significant one. Earlier this cap of 15% was there only for surcharge leviable on LTCG on listed equity shares or a unit of an equity oriented mutual fund or a unit of a business trust.

“The long-term capital gains on listed equity shares, units etc. are liable to maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes up to 37 per cent. I propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent,” said finance minister Nirmala Sitharaman during her budget speech.

“Surcharge on long term capital gains on all types of assets will be capped at 15%. This benefit was earlier available only for listed equity shares and mutual fund units. The extension of this benefit to unlisted asset will help reduce the tax burden for investors in startups, manufacturing, bonds and other types of unlisted assets,” says Rajesh Gandhi, Partner, Deloitte India.

At present the surcharges on long term capital gain for an individual assessee on assets is 10% if the income is above Rs 50 lakh but upto Rs 1 crore. It is 15% if the income is between Rs 1 crore to Rs 2 crore and 25% if the income is above Rs 2 crore and upto Rs 5 crore. In case the income is above Rs 5 crore the surcharge is 37%. As a result the people who were falling in the income above Rs 2 crore bracket will mainly benefit from this capping.

Among others, this move will benefit the holder of unlisted securities especially in the new start up. “FM has capped the LTCG on equity at 15 percent, which should be beneficial for shareholders of unlisted companies,” says Vikas Singhania, CEO, TradeSmart.

As per the Budget memorandum:

The amount of income-tax shall be increased by a surcharge for the purposes of the Union,—
(a) in the case of every individual or HUF or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act, including an individual or HUF exercising option under section 115BAC, not having any income under section 115AD of the Act,—
(i) having a total income (including the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent. of such income- tax; and having a total income (including the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding one crore rupees but not exceeding two crore rupees, at the rate of fifteen per cent. of such income-tax;
(iii) having a total income (excluding the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent. of such income-tax; (iv) having a total income (excluding the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding five crore rupees, at the rate of thirty-seven per cent. of such income-tax;
(v) having a total income (including the income by way of dividend or income under the provisions of section 111A and 112A of the Act) exceeding two crore rupees, but is not covered under clause (iii) or (iv) above, at the rate of fifteen per cent of such income tax: Provided that in case where the total income includes any income by way of dividend or income chargeable under section 111A and 112A of the Act, the rate of surcharge on the amount of income-tax computed in respect of that part of income shall not exceed fifteen percent;
However, surcharge shall be at the rates provided in (i) to (iv) above for all category of income without excluding dividend or capital gains in case if the income is taxable under section 115A, 115AB, 115AC, 115ACA and 115E. (aa) in the case of individual or every association of person or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act having income under section 115AD of the Act,––
(i) having a total income exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of ten per cent of such income-tax; and (ii) having a total income exceeding one crore rupees but not exceeding two crore rupees, at the rate of fifteen per cent of such income-tax; having a total income [excluding the income by way of dividend or income of the nature referred to in clause (b) of sub-section (1) of section 115AD of the Act] exceeding two crore rupees but not exceeding five crore rupees, at the rate of twenty-five per cent. of such income-tax;
(iv) having a total income [excluding the income by way of dividend or income of the nature referred to in clause (b) of sub-section (1) of section 115AD of the Act] exceeding five crore rupees, at the rate of thirty-seven per cent. of such income-tax;
(v) having a total income [including the income by way of dividend or income of the nature referred to in clause (b) of sub-section (1) of section 115AD of the Act] exceeding two crore rupees but is not covered in sub-clauses (iii) and (iv), at the rate of fifteen per cent. of such income-tax:
Provided that in case where the total income includes any income by way of dividend or income chargeable under clause (b) of sub-section (1) of section 115AD of the Act, the rate of surcharge on the income-tax calculated on that part of income shall not exceed fifteen percent;
(b) in the case of every co-operative society (except resident co-operative society opting under section 115BAD) or firm or local authority, at the rate of twelve per cent of such income-tax, where the total income exceeds one crore rupees;
(c) In case of resident co-operative society opting under section 115BAD, at the rate of ten percent of such income tax.
(d) in the case of every domestic company, except such domestic company whose income is chargeable to tax under section 115BAA or section 115BAB of the Act,—
(i) at the rate of seven per cent. of such income-tax, where the total income exceeds one crore rupees but does not exceed ten crore rupees;
(ii) at the rate of twelve per cent. of such income-tax, where the total income exceeds ten crore rupees; (e) in the case of domestic company whose income is chargeable to tax under section 115BAA or 115BAB of the Act, at the rate of ten percent;
(f) in the case of every company, other than a domestic company,—
(i) at the rate of two per cent. of such income-tax, where the total income
exceeds one crore rupees but does not exceed ten crore rupees;
(ii) at the rate of five per cent. of such income-tax, where the total income
exceeds ten crore rupees;
(g) In other cases (including sections 92CE, 115-O, 115QA, 115R, 115TA or
115TD), the surcharge shall be levied at the rate of twelve percent.

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