Home / Budget / News /  Income tax change: LTCG surcharge capped at 15%. What it means for taxpayers

The surcharge on the long-term capital gains (LTCG) has been capped at 15% as announced by Finance Minister Nirmala Sitharaman in her Budget 2022 speech on Tuesday. The rate of long term capital gains vary between 10% to 20% depending upon the type or class of assets. 

An individual and an HUF have to pay surcharge calculated on tax liability which is over and above their base tax liability if the taxable income exceeds 50 lakh. The rate at which surcharge is payable is based on slab of the taxpayer's income. Higher the income slab higher is the rate of surcharge. 

“Presently the surcharge on LTCG on listed shares and equity oriented units included in your income is capped at maximum of 15% even if otherwise you are liable to pay surcharge at higher rate on other income. This cap of 15% is applied only for one category of long term capital gains but for rest of long term capital gains, you have to pay surcharge at applicable rates. The finance minister has proposed the cap of 15% surcharge on LTCG of all nature," said Tax expert Balwant Jain.

“In order to promote long term investments in equity of start-up, the rate of surcharge has been capped at 15%, irrespective of amount of long term capital gains. This is beneficial for the individual investors who are holding shares for more than 12 months and selling it thereafter, thus to treat gains on sale of such shares as long term capital gains," said Saurrav Sood, Practice Leader, International tax, SW India. 

Further, the beneficial rate of surcharge shall also apply to an Association of Persons (AOP). Thus, where such shares are held for less than 12 months, they will be taxable as short term capital gains and the rate of surcharge will apply as is i.e. the highest rate to go upto 37% depending upon the quantum of gains derived, explained Sood. 

“It will be interesting to see the fine print of finance bill i.e. whether such benefit is restricted to only equity shares or is extended to all class of long term capital assets," he added.

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