On Monday, Revenue Secretary Tarun Bajaj said, most of the long-term capital gains from equities in FY20 came from people earning ₹50 lakh and more.
Furthermore, he said the Finance Act of 2018 on long-term capital gain has served as a fair tax.
Long term capital gains from equities in FY20
Long-term equity gains are above a threshold of ₹1 lakh held for more than a year, taxed at 10%.
On April 1, 2019, the benefits for long-term equity gains came into effect.
Furthermore, people made ₹95,000 crores of long-term capital gains in 2019-20, says Tarun Bajaj.
Equities gains in FY20
Tarun Bajaj said in a response, “can you beat that? 80% of that long-term capital gain was made by people earning ₹50 lakh and more.”
He further added, “I can assure you, it will not be 80%, it will be 90%, the way people have traded in the market this year. I think if we compare yourself with other countries, you will notice that other countries are charging LTCG at the applicable rate (as per the slab) or at 25-30%. These are the kind of taxes. In India we have 10%.”
He says that giving long-term capital gain tax relief will only increase money in the pockets of a few.
India’s tax regime
The capital gains tax regime has become too complicated and requires revision, says Tarun Bajaj.
Furthermore, the government conducted groundwork for the Indian tax regime and other countries to simplify the tax regime.
Additionally, the government’s policy is to detach from tax breaks and lower the tax rate regime.
Long-term and short-term capital gains
While short-term capital gains are heavily taxed, long-term capital gains are not.
Furthermore, the tax rate and holding price differ as per asset class: jewellery, property, equity-oriented mutual funds, listed shares, and debt-oriented mutual funds.
Moreover, the holding period for determining the gain made when selling assets is short-term or long-term, as prescribed by the capital gains tax regime.
As new capital gains tax regimes are issues, high-income groups would not benefit from the relief.