In a booster dose for shareholders of unlisted companies, finance minister Arun Jaitley on Monday reduced the duration of long-term capital gains period for unlisted companies from 3 to 2 years.
“The period for getting benefit of long-term capital gain regime in case of unlisted companies is proposed to be reduced from three to two years,” Jaitley said.
At present, shareholders had to hold shares for 3 years to avail 20% long-term capital gains tax. Share sale before 3 years attracted tax according to the prevailing income tax slabs, which was 30% in most cases.
The move will make it easier for shareholders of unlisted firms to exit.
Additionally, the budget also proposed to provide a capital gains tax exemption to boost housing by shifting the date of agreement fixing the amount of consideration for the transfer of immovable property, and not the date of registration in cases where payment is not made in cash.
“It is proposed to provide that the date of agreement fixing the amount of consideration for the transfer of immovable property and not the date of registration shall be taken for the purposes of computing capital gains in case of transfer of immovable property if any payment in consequence of such agreement has been made by the purchaser of the property through any mode other than cash,” Jaitley said.
Besides, the budget also exempted capital gains tax on income from transfer of units in merger or consolidation of plans of a mutual fund scheme. “It is proposed to provide that any transfer of units in merger or consolidation of plans of a mutual fund scheme shall be exempt from capital gains tax,” the finance minister said.
The new norms implies that investors will be required to hold on to their bets in unlisted companies for a shorter period to claim tax exemptions. This should enable greater fund flow to companies whose shares are not traded on the stock market.