Union Budget 2020-21 Expectations for LTCG Tax on Equities: The tax on Long Term Capital Gains (LTCG) on equities has been reintroduced in the Union Budget 2018 – soon after about 14 years of replacing it with the Securities Transaction Tax (STT) in 2004.
Accordingly, 10 per cent tax is payable on LTCG above the threshold limit of Rs 1 lakh on gains from redemption of equities and equity-oriented funds in a monetary year with no indexation advantage.
Option was offered to current investors to redeem their investments till January 31, 2018 with out paying any tax on LTCG.
Even if the current investors continue to hold their investments, they are permitted to deduct larger of the actual investment worth and the fair marketplace worth per share/unit as on January 31, 2018 as expense of investment from the redemption worth to calculate the LTCG.
The reintroduction of LTCG tax had brought on a enormous dent in the investors’ self-assurance, resulting in post-spending budget marketplace meltdown. The return on equities remained subdued for the complete 2019 and most portion of 2020.
Subsequently, the Dividend Distribution Tax (DDT) has been removed and the dividend revenue has been produced taxable, but Stamp Duty has been imposed on equity investments.
Budget 2021 Expectations: Taxpayers want the old revenue tax regime to continue
While removal of DDT has resulted in larger dividend payments, investors in larger tax brackets face larger tax burden soon after the dividend revenue becomes taxable.
With the LTCG taxation at 10 per cent imposing an more tax burden since of other transaction taxes – like STT, Stamp Duty – in spot, equity investors want some respite from the several tax burden.
“The government should exempt long-term capital gains on the sale of Indian-listed equity shares. Alternatively, it should grant the aforesaid tax exemption to investors who have held the securities for more than two years,” mentioned Deloitte India in its pre-spending budget expectations on the Financial Services Sector.
“This measure will help the Indian capital markets grow exponentially and also encourage Indian resident investors to channelise their long-term savings into Indian listed equities,” Deloitte India added.