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Budget 2020: Changes in DDT, capital gains tax on the anvil

Budget 2020: Changes in DDT, capital gains tax on the anvil

Budget 2020: Changes in DDT, capital gains tax on the anvil
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By Timsy Jaipuria  Jan 21, 2020 6:16:17 AM IST (Updated)

The government is likely to bring significant changes in direct taxes on equities in the Union Budget 2020, as part of efforts to simplify taxation rules, according to people familiar with the matter.

The government is likely to bring significant changes in direct taxes on equities in the Union Budget 2020, as part of efforts to simplify taxation rules, according to people familiar with the matter.

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The government might change the applicability of dividend distribution tax (DDT) and shift the tax incidence from the company who issues the dividend to the shareholder who receives the dividend, they said, asking anonymity.
This was also one of the key suggestions made by the convenor of the task force on simplification of direct tax legislation and former member of the Central Board of Direct Taxes Akhilesh Ranjan.
CNBC-TV18 had earlier in August 2019 reported that the government may take up this proposal  to bring law on DDT on a par with other countries.
Ranjan had said equity taxes needed serious simplification and tax rate cuts alone couldn’t help India improve tax-to-GDP ratio.
Apart from this, the government is also likely to extend the timeline for long-term capital gains tax (LTCG) on equities from current 12 months to 24 months. Currently, LTCG of 10 percent is paid by the investors if they hold listed equity for 12 months or more, and 20 percent is charged in case of holding unlisted equity for 12 months or more.
Sources added: “Simplification of taxation laws are being considered as the best way forward to improve collections and compliance in the system.”
Sources also indicated the government might do away with capital gains on sale of property to revive the real estate market. Currently, one has to pay 30 percent capital gains on the sale of a property if the property holder doesn't re-invest it back in property within three years, and 20 percent with inflation indexation if the property is held for more than two year.
The sources said these changes are being considered to be included in the Budget, however, the last political is call yet to be taken.
Ranjan had also hinted: “There are a number of areas in which task force panel has made far-reaching changes in the law. For example, in capital gains tax law we have really gone in for making all the provisions very logical and simple to understand. Similarly, law simplification is suggested in the area of taxation and computation of tax on charity.”
These simplification measures taken along with rate rationalisation can make a lot of difference in compliance and revenue collections. Simplifications can only help in making these laws more comprehensible and giving comfort to the taxpayer to comply with the norms, Ranjan had added.
Now, only time will tell whether the government will take a call to make these changes.
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