LTCG, Dividend Distribution Tax to go away? PMO moots rationalisation of tax on equity; Sensex soars

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Updated: Oct 29, 2019 11:51 AM

The Prime Minister’s Office is reviewing the tax structure on equity, in order to simplify the regime and make investments in Indian markets more attractive, TV news channel CNBC Awaaz reported citing three sources.

Indian equity, ltcg, ddt, stt, tax structure, dividend distribution tax, PMOThe government is also considering abolishing Dividend Distribution Tax.

Equity investors may soon have something to cheer about, with a mega tax rationalisation move happening in the highest office in the country. The Prime Minister’s Office is reviewing the tax structure on equity, in order to simplify the regime and make investments in Indian markets more attractive, TV news channel CNBC Awaaz reported citing three sources. Benchmark equity indices Sensex and Nifty soared further on the news, after opening higher today. The Department of Economic Affairs and the revenue department have had meetings with the PMO, the report said.

Also Read: FPI boost: Rupee remains stable in 2019, down just 1.7%

The government is considering doing away with multiple taxes such as LTCG, DDT, STT, etc, and may move to a single-tax structure on equity investments, making compliance easier. The PMO is also said to be reviewing current rates of Long-term Capital Gains Tax and Securities Transaction Tax. The government is also considering abolishing Dividend Distribution Tax. Domestic companies pay this tax at the rate of 15 percent of the aggregate dividend declared, distributed or paid.

The PMO has yet not decided the timing of the announcement but the media report has clarified that the step has been taken, where a series of tax alignments for equities have been planned. LTCG on equities was made taxable at the rate of 10% after the Budget of 2018.

Also Read: PM Modi embarks on two-day Saudi Arabia visit; investments, strategic relations in focus

To boost investor sentiment, Finance Minister Nirmala Sitharaman had withdrawn the enhanced surcharge proposed on long and short-term capital gains. Data showed that the foreign portfolio investors pulled out Rs 23,000 crore from domestic equities in July and August, after the FM’s maiden budget proposed to levy a surcharge on higher tax-income groups. This had affected 40 per cent of FPIs.

Indian economy is growing at a slow pace for the last one year and it registered a 6-year low GDP growth rate in the first quarter of the present fiscal year. Since then, the government has announced many measures to boost the economy. Now, the new plan of the Narendra Modi-led government is aimed at boosting the sentiment of the investors which will add more liquidity into the system and hence will stimulate the investment.

Meanwhile, the headline index opened marginally higher after S&P 500 soared to a fresh record high yesterday. However, the 31-share index extended gains on Tuesday afternoon as investor sentiment was buoyed due to the tax cut buzz. The Sensex soared more than 510 points to hit a fresh 4-month high of 39,740.

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