The direct tax draft code unveiled last week includes proposals to levy tax on capital gains as regular income with same rates as normal tax. Also proposed is abolition of the securities transaction tax.

The relief available to long and short-term gains on selling of shares in the stock market is also proposed to be withdrawn.

Making a distinction between investment assets and business capital assets, the draft code proposes taxing of gains on transfer of investment assets. Gains on transfer of business capital assets will attract tax as business income.

The draft removes the concepts of short and long-term assets and creates indexation benefits for investment assets that are one year or older.

Income generated from indirect transfer of an investment asset in India will also be included as part of taxable income.

The draft code also proposes to exempt gains from transfer of investment assets that come under 'business reorganisation' and are in shareholders' hands.