Budget 2019: Are both LTCG tax on equities and STT here to stay? Here’s what experts say

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Updated: January 30, 2019 4:09:28 PM

Budget 2019: After the Finance Minister announced LTCG tax on equities last year dampening investor sentiment, experts say that there is a case for scrapping either the STT or the LTCG tax on equities. However, any such move will come as a positive surprise.

IPOs, FPOs, ESoPs, LTCG tax, long-term capital gain, capital gain, moneyBudget 2019: “Any stimulus in the form of removal of either STT or LTCG will surely boost sentiment amongst market participants,” Jatin Khemani said.

Budget 2019: After imposition of LTCG tax on equities in the previous Budget 2018 lead to dampened investor sentiment, experts say that while there is a case for scrapping either the STT or the LTCG tax, any such move will come as a positive surprise. “When Securities Transaction Tax (STT) was introduced, in a way it was in lieu of Long Term Capital Gains (LTCG) tax. Now, LTCG tax has been re-introduced and yet there is no tinkering on STT, which probably makes India as the only country in the world to have both the taxes simultaneously,” Jatin Khemani, founder of Stalwart Advisors told Financial Express Online.

According to Khemani, over last two years, demonetization and a not-so-optimal implementation of GST have, in a way, ruptured the growth momentum Indian economy was experiencing, impacting the sentiment on the dalal street. “Amidst this, any stimulus in the form of removal of either STT or LTCG will surely boost sentiment amongst market participants,” he said.

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However, given the current precarious fiscal position, any relief on this front seems unlikely. “Given the tricky fiscal situation that the country finds itself in, it is difficult to see taxes being cut either in this budget or in the July budget. Secondly, given that this is largely a vote on account, the government is unlikely to expedite big ticket policy changes in this budget,” Saurabh Mukherjea, Founder and CIO, Marcellus Investment Managers told Financial Express Online, adding that the government is likely to signal policy changes relating to universal basic income and lowering taxes for the middle class, ahead of Lok Sabha Elections 2019.

Ajay Bodke of Prabhudas Lilladher notes that if the government scraps either of the tax, it will come as a positive surprise to the street. “When STT was introduced by the govt it was explicitly stated that it’s either STT or LTCG. Though it was introduced by the previous government, but it’s the sovereign that matters and not who’s in power,” Ajay Bodke, CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher told Financial Express Online.

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