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Capital Gains Tax - Coggle Diagram
Capital Gains Tax
What is it?
If a person inherits property and does not sell it, no capital gains tax is required
Such assets include jewelry, machinery, leasehold rights, trademarks, patents, autos, real estate, buildings, and land
Tax on such gains is called CGT
Profit or gain realized by transfer of a capital asset
Items are not considered: Agricultural land, personal items and consumables, and certain types of Bonds
Types of Capital Assets
Short Term:
When assets are held for less than 36 month
Long Term
: Individuals who own a capital asset for more than 36 months
Advantages of CGT
Passive income is taxed as actively as the earned income
Low taxes on stock gains shifts the tax burden onto working people.
Businesses often park their money in low-tax assets
Why is it so complicated?
Holding period changes from asset to asset
Exemptions available against it come with their own complex conditions
Rate changes from asset to asset
Is cryptocurrency taxed as capital gains?
Investors cannot adjust profits and losses on different investments unlike other capitals
2022 budget has proposed a 30% tax on crypto transactions
What distortions does it create?
Discouraging long term trade
Regressive in nature
Fixing these anomalies
Exemptions for LTCG such as reinvestment
Small investors can also be given relief by reducing rates of capital gains
Bringing uniformity in rates and holding periods