Govt collected ₹98,681 cr LTCG tax on listed equities in FY23

The government mopped up ₹98,681 crore from long-term capital gains tax on listed equities in the financial year 2022-23, Minister of State for Finance Pankaj Chaudhary told the Parliament on Tuesday.

The Centre garnered ₹98,681.34 crore from LTCG in 2022-23, up 15% compared with ₹86,075.49 crore collected in FY22.

The collection was about ₹38,589 crore in 2020-21, ₹26,008 crore in 2019-20 and ₹29,220 crore in 2018-19.

Budget 2024-25 hiked long-term capital gains tax on equities to 12.5% from 10% earlier. The exemption threshold was also hiked to ₹1.25 lakh, from ₹1 lakh previously.

Long term capital gains tax on equities and units of equity-linked mutual funds was introduced in 2018. LTCG were earlier taxed at 10%, with gains of up to ₹1 lakh annually being exempted.

Long term gains on all financial and non-financial assets now attract a tax rate of 12.5%. Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.

Short term gains on specified financial assets attract a tax rate of 20% instead of 15% earlier.

The government withdrew indexation benefits for the purpose of capital gains calculation in case of property sales in the Budget 2024. With the changes announced in the budget 2024-25, long-term capital gains tax of 12.5% will be applicable on gains arising out of property sales without indexation benefits. Earlier 20% LTCG was charged along with indexation benefits.

The removal of the indexation benefit is largely negative for all those planning to sell their old properties, says Aniket Dani, director of Research, CRISIL Market Intelligence and Analytics.

“On the one hand, the reduction in the long-term capital gains tax rate from 20% to 12.5% should boost investments over the near to medium term. On the other, the removal of indexation benefit will increase the tax incidence on property sale, especially for older properties,” says Gautam Shahi, director, CRISIL Ratings.

The removal of the indexation benefit on the cost of acquisition could potentially offset the gains particularly for investors holding assets such as immovable property for a considerable duration, says Vinita Krishnan, executive director, Khaitan & Co.