Stock markets go down for different reasons, nothing to do with taxation: DEA Secy

Ajay Seth, DEA Secretary

In light of recent stock market volatility, Economic Affairs Secretary Ajay Seth addressed concerns linking market fluctuations to taxation policies and emphasised that the two are different issues and the reasons are different for the stock market correction.

“Stock markets go up and down for different reasons, and they have nothing to do with taxation. Tax rates and stock market are different issues," Seth said at a press conference in Vishakhapatnam on March 6.

The DEA Secretary reaffirmed the government's commitment for uniform tax treatment across asset classes.

Seth emphasised that the government does not differentiate between asset classes in taxation, applying uniform tax rates across the board.

“The government of India does not take a view on differentiating between different asset classes. We charge them uniformly,” he said.

The rate for other long-term capital gains on all assets was rationalised to 12.5 percent without indexation in Budget 2024 to simplify the taxation of capital gains and ease computation. This rate was earlier 20 percent with indexation.

The Indian economy has grown by over 7 percent in the past three years, a performance other countries aim to emulate, he said, adding that the economy is doing well.

The Indian stock market has experienced notable fluctuations in recent weeks. On March 6, the Nifty 50 index closed around 22,550, while the BSE Sensex gained approximately 610 points.

This uptick followed a challenging period where the Nifty 50 endured its longest losing streak since 1996, with a 15 percent decline from its September peak, erasing $1 trillion in investor wealth.

Economists have said that there are several factors that have contributed to recent market volatility, including imposition of tariffs by the United States on key trading partners, persistent foreign investor outflows and corporate earnings slowdown.

The United States' imposition of tariffs on major trading partners, including China, Canada, and Mexico, has heightened trade tensions, affecting global growth. The uncertainty over reciprocal tariffs on India have also impacted investor sentiment in India. Foreign institutional investors have also been pulling funds out of Indian equities, offloading nearly $25 billion since September. The October-December quarter witnessed a mere 5 percent growth in corporate profits for Nifty 50 companies, marking the third consecutive quarter of single-digit increases.