Definition of ‘long-term’ may also be amended from one to two years, with the government wanting to differentiate between a strategic investor and short-term investor
The Centre may scrap the long-term capital gains (LTCG) tax, which was introduced in Budget 2019, to attract foreign investment. The government has approach tax advisors for the same and may remove LTCG tax entirely or only on listed equities, The Economic Times reported.
Definition of ‘long-term’ may also be amended from one to two years, with the government wanting to differentiate between a strategic investor and short-term investor, sources told the paper.
On its introduction in Budget 2019, the 10 percent LTCG tax was met with immense criticism. Scrapping it would bring India’s tax on equity investments in line with global standards, as promised by Prime Minister Narendra Modi in September 2019.
The development comes as collections from the tax were nowhere near the expected Rs 40,000 crore per annum expected by the government, while investor forums have pointed out that most developed markets, which compete with India for capital, do not tax LTCG, the sources added.
Many foreign portfolio investors (FPIs) also reached out to the government to consider removing the tax, and sources told ET that these FPIs would likely keep away from divestment plans due to LTCG and other tax-related issues.
Sameer Gupta, Tax Markets Leader at EY India, told the paper that even reverting to the earlier position of long-term capital gains exemption will incentivise long-term investors as they mostly stay invested for more than 12 months.
Experts have also raised the issue of disparity between the holding periods for assets such as listed equity, real estate and gold.Notably, the Centre is scrambling to manage Rs 8.07 lakh crore fiscal deficit (till November 2019), which is 13 percent above the year target, data from the Controller General of Accounts showed.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.