Indian-listed shares:-Long-term capital gains on transfer of the above securities (where securities transaction tax is payable) would continue to be eligible for a 100% deduction, and remain exempt from tax. The DTC has reduced the tax burden substantially for short-term small investors. Short-term capital gains on such securities (taxable at 15.45%) would be eligible for 50% deduction and thereafter taxed as per the normal slab rates applicable. Effectively, the tax under DTC would range between 5% and 15%, depending on the tax bracket in which an individual falls. Small investors (with an income between Rs 2 lakh and Rs 5 lakh) would pay only 5% capital gains tax.
There is no change in the period of holding these securities and would be considered long term if held for more than a year from the date of acquisition.
Treatment of other securities:-Capital gains from the sale of any other security would be taxed as per the normal slab rates applicable vis-à-vis the concessional rate of 20.6% available for long-term capital gains. Long-term gains would continue to enjoy indexation benefit and the base year index would shift from April 1, 1981, to April 1, 2000. Also, in case of long-term capital gains, deductions such as expenses incurred to transfer an asset and relief from rollover, subject to conditions, would be available. However, no deductions would be available on short-term capital gains.
A change has been proposed in the DTC vis-à-vis the period of holding other securities. In order to be considered long-term, a security must be held for more than a year from the end of the fiscal in which it is acquired. For all other securities, the holding period of 36 months from the date of acquisition would effectively come down to over 12 months from the end of the fiscal in which a security is acquired.
As the DTC would now come into effect from April 1, 2012 and not from April 1, 2011 as intended earlier, investors have enough time to restructure their investment strategy..