Cap on surcharge of long-term capital gains provides relief to HNIs

The Finance Bill 2022 has proposed to cap the surcharge on long-term capital gains (LTCG) at 15 per cent.

While such surcharge is already fixed at 15 per cent for capital gains arising from on market sale of equity shares and certain other securities, capital gains arising from any other capital asset is subject to surcharge as high as 37 pert cent, depending on the total income of the taxpayer.

Accordingly, capital gains arising to an HNI's on sale of immovable property, unlisted shares, gains arising from off market sale of listed shares and even alienation of shares of foreign company are all amenable to the higher surcharge ranging up to of 37 per cent.

Kunal Savani, Partner, Cyril Amarchand Mangaldas, said that in order to provide relief to such HNIs/investors earning capital gains income, the Bill proposes to cap the surcharge on long-term capital gains arising from any capital asset to a maximum of 15 per cent.

This would result in effective capital gain rates reducing from 28.5 per cent to 23.92 per cent (or 14.25 per cent to 11.96 per cent).

"Having said the above, it would be pertinent to note that such cap has only been proposed to be placed on long-term gains. Short-term gains on such assets would continue to be subject to surcharge ranging up to 37 per cent," he added.