Budget 2020: Long-term investors may get this gift from India; DDT, LTCG tax relief on cards?

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Updated: January 17, 2020 1:43:22 PM

Union Budget 2020 India: There is a good possibility that the government can waive off LTCG tax in the upcoming budget.

LTCG tax, long-term capital gain, STT, DTT,CTT, equity investment, Budget 2020, Union Budget 2020 India, Budget 2020, India Budget 2020-21 Budget 2020 India: LTCG tax made it compulsory for the investor to pay 10 per cent LTCG tax on the profit earned over Rs 1 lakh in a year if he is selling listed equity shares after holding them for one year.

Budget 2020-21: In order to attract long-term investment and amid criticism received on the re-introduction of the LTCG tax on equities, the government may give the investors a tax – waiver gift in the upcoming budget. The move is being speculated on the basis of Prime Minister Narendra Modi’s statement made in September 2019, that his government was working towards bringing the tax on equity investments in-line with the global standards. LTCG tax was introduced in Union Budget 2018-2019, which made it compulsory for the investor to pay 10 per cent LTCG tax on the profit earned over Rs 1 lakh in a year if he is selling listed equity shares after holding them for one year.

“There is a good possibility that the government can waive off LTCG tax in the upcoming budget. There is also a strong recommendation to abolish DDT, while STT and CTT may continue as they are,” Maulik Doshi, Senior Executive Director, Transfer Pricing and Transaction Advisory Services, Nexdigm (SKP), told Financial Express Online. He added that the government should waive off these taxes to make the Indian equity market globally more competitive.

The government may also go for extending the non-taxable duration of long-term gains from one year to two years. The changes can be a positive step as it will make the Indian market more competitive as there are many countries that do not impose LTCG tax.

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“It is likely that the government may abolish LTCG tax altogether or may tweak the definition of ‘long term’ from a year to two years. The government had estimated the imposition of this tax would bring marginal revenue gain of about Rs 20,000 crore in the first year,” Rahul Agarwal, Director Wealth Discovery / EZ Wealth, told Financial Express Online. Apart from this reduction in STT, CTT and some tweaks in the DDT are also some measures that are expected to be implemented, he added.

Meanwhile, with increasing global competition, the equity market has become too sensitive to policy changes. In the Budget announcements in July 2019, investors pulled out nearly Rs 30,000 crore from the India equity market after Finance Minister Nirmala Sitharaman announced to impose the super-rich tax.

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