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LTCG exceeding Rs 1 lakh to be taxed at 10 per cent

LTCG exceeding Rs 1 lakh to be taxed at 10 per cent
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Finance Minister Arun Jaitley on Thursday proposed to tax long-term capital gains on equities exceeding Rs 1 lakh at 10 per cent, which is expected to bring in revenue of Rs 20,000 crore.

Mumbai: Finance Minister Arun Jaitley on Thursday proposed to tax long-term capital gains on equities exceeding Rs 1 lakh at 10 per cent, which is expected to bring in revenue of Rs 20,000 crore.

"The return on investment in equity is already quite attractive even without tax exemption. There is therefore a strong case for bringing long term capital gains from listed equities in the tax net," Jaitley said in his Budget speech.

"However, recognising the fact that vibrant equity market is essential for economic growth, I propose only a modest change in the present regime. I propose to tax such long term capital gains exceeding Rs 1 lakh at the rate of 10 per cent without allowing the benefit of any indexation."

According to Jaitley, reforms introduced by the government and "incentives given so far" has made the equity market buoyant.

"The total amount of exempted capital gains from listed shares and units is around Rs 367,000 crore as per returns filed for AY 17-18. Major part of this gain has accrued to corporates and LLPs," Jaitley said.

"This has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets."

However, capital gains made on shares until January 31, 2018 will be "grandfathered" and those from holding them up to one year will remain taxed at the rate of 15 per cent.

"Further, I also propose to introduce a tax on distributed income by equity oriented mutual fund at the rate of 10 per cent. This will provide level playing field across growth oriented funds and dividend distributing funds," Jaitley said.

"In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about Rs 20,000 crore in the first year. The revenues in subsequent years may be more."

Just after the announcement, the two key indices -- S&P BSE Sensex and NSE Nifty50 -- receded, but soon recovered.

The wider Nifty50 of the National Stock Exchange (NSE) fell by 10.80 points or 0.10 per cent to provisionally close (at 3.30 p.m.) at 11,016.90 points.

On the BSE, the barometer 30-scrip Sensitive Index (Sensex) closed at 35,906.66 points -- down 58.36 points or 0.16 per cent from its previous session's close.

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