It’s time to overhaul India’s capital gains tax regime

livemint.com:

₹1 lakh. In contrast, gains on debt mutual funds are taxed at the marginal rate of income tax, regardless of how long they are held. And in the case of real estate, the cut-off is two years, with capital gains taxed at the marginal rate of income tax in case property is sold within that span, and at 20% (after adjusting for inflation) if it’s held longer.

Also, this tax can be avoided by reinvesting the proceeds in another property. Equity investors, however, must pay up even if they are only using the money to shuffle their portfolio. Holders of physical gold, meanwhile, must hold this metal for three years for their gains to qualify as long-term.

Each rule may have had a reason, but taken together, their variation makes investment planning painful for those who brave it on their own. Since all taxation should go by the cardinal principle that people should easily be able to work out their liability, it’s time to simplify the regime. Rate variation serves as a device to alter investment incentives, no doubt, but the only aspect of it that’s easily justified is the heavier burden placed on quicker buying and selling.

Speculators paying more is a well-accepted practice, though what counts as short-term should be the same for all avenues. Varied rates across asset classes are harder to explain, since their specific policy aims must outweigh the hidden ill-effects of distorted investment flows overall. The government has lately sought to end anomalies.