Mumbai: Prime Minister Narendra Modi’s suggested of increasing contribution of financial market participants to the exchequer and the finance ministry may review tax regime on long-term capital gains.
If an investor is holding a stock for more than 12 months, it is considered to be a long-term investment and is exempted from taxes, gains from transactions in shares held for less than 12 months are considered short-term capital gains and are subject to 15 per cent tax. In the review of the long term capital gains may lead to changing the period for gains to qualify as long term capital gains and the tax rates may remain unchanged. The holding period most probably will be increased. If tax is imposed on LTCG it will make Indian market look unattractive to global market.
According to a report in Indian Express the head of a leading financial firm also said that after the finance minister’s clarification, it is unlikely that the government will impose a capital gains tax for the long term. “We expect that the government will extend the holding period of equities to qualify for LTCG tax. It is also expected that the government may impose dividend tax on dividend income of less than Rs 10 lakh,” he said.
Speaking at an event Modi had made the government’s intention mighty clear of increasing the tax for the stock market“…those who profit from financial markets must make a fair contribution to nation-building through taxes. For various reasons, the contribution of tax from those who make money on the markets has been low. To some extent, it may be due to illegal activities and fraud. To stop this, Sebi has to be extremely vigilant. To some extent, the low contribution of taxes may also be due to the structure of our tax laws,” Modi had said. The review of the LTCG structure is being slated with the implementation of the General Anti Avoidance Rules (GAAR), which is slated to kick in from April 1.