India cannot become Viksit Bharat without taxing the fastest-growing element of income at a decent rate, Finance Secretary TV Somanathan said while defending the move to increase the long-term capital gains tax (LTCG).
"Any simplification doesn't necessarily mean a reduction in rates. This is a clean-up of a complex capital tax regime and it is now simpler and uniform. Our rate of capital tax by global standards on long-term listed equities is low, it is not high," Somanathan said in an interview with Moneycotrol on July 23.
Capital gain refers to any profit or gain that arises from the sale of a 'capital asset'.
The Union Budget for 2024-25 hiked LTCG to 12.5 percent from 10 percent, while short-term capital gains tax is now at 20 percent on specified financial assets.
Security Transaction Tax (STT) on the sale of an option in securities was increased from 0.0625 percent to 0.1 percent of the option premium. On the sale of futures in securities, it was hiked from 0.0125 percent to 0.02 percent of the price at which such futures are traded.
On whether higher LTCG could impact the country's middle class, Somanathan said the rich majorly benefit from capital gains.
"Capital gains by no means is the preserve of the middle class, it is quite the opposite. The middle class is not the main earner of capital gains tax, it shows the rich piggybacking on the middle class claiming that it is a middle-class issue," the secretary added.
In what may be indicative of the government's stance on the capital gains tax regime going ahead, Somanathan said, "Earners of capital gains are not poor and we will keep taxing them at a decent rate."
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