Why FM Nirmala Sitharaman must listen to investors on capital gains tax |
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Why FM Nirmala Sitharaman must listen to investors on capital gains tax
Long-term capital gains on equity are taxed at 12.5 % and short-term at 15 % provided the transactions are done through stock exchanges on which securities transaction taxes are paid.
Finance Minister Nirmala Sitharaman has said that she is willing to listen to investors on what they have to say about reducing taxes on long-term and short-term capital gains (LTCG and STCG). No harm in listening to anyone, but she would do well to listen to others as well, and not just equity investors who are any way mollycoddled in all tax jurisdictions.
There are two things we need to understand. Capital infusion is vital for productivity and growth, so there is a case to be made for giving equity investment some preferential treatment on taxes. The question is how much preferential treatment.
Long-term capital gains on equity are taxed at 12.5 percent and short-term at 15 percent provided the transactions are done through stock exchanges on which securities transaction taxes are paid.
Now compare this to how debt is taxed. Debt is also capital, and it is taxed in the investor’s hands at his or her tax bracket. At the top end that means a gross tax of over 30 percent, when one includes........