Government considering 2-year holding period for LTCG tax
Tax

The government is seeking advice from tax experts on the long-term capital gains tax introduced in the Budget of FY18. One of the options considered includes removal of the long-term capital gains tax on listed equities. The other option under consideration is extending the one-year holding period to two years.

The Prime Minister Mr Narendra Modi had in a speech last year in New York, mentioned to bring taxation of equity investments in line with global standards. Most developed countries in the world do not tax long-term capital gains. 

An amendment to long-term capital tax either by way of withdrawing it or extending the holding period would be in favour of attracting foreign investments. The long-term capital gains tax is also seen unfavourably by the capital markets. The government also aims at differentiating between a strategic investor and a short-term investor.

Also Read: Tax Query: PPF account can be extended further in blocks of 5 years

The government’s disinvestment plan requires both an investor appetite and a favourable equity market. Many strategic investors and Foreign Portfolio Investors (FPIs) are looking forward to a reconsideration of long-term capital gains tax. Sovereign funds and long-term funds generally stay invested for more than one year. 

Alternately, the government can also bring parity in the holding period for all asset classes such as equities, land and building, debt funds, gold, and so on. The holding period can be set uniformly at three years for all asset classes.

If the government withdraws the long-term capital gains tax on listed equities, it is likely to revive long-term equity investments from FPIs as well as create a favourable tax regime for the disinvestment programme.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in

You May Also Like

Taxation of dividend income received on or after 1 April 2020 (FY 2020-21)

You may receive a dividend from your equity or mutual fund investments.…
GSTR-9

CBIC has notified an extension of two months to various GST compliance

The government of India has notified yet another extension for the completion…
Gold Jewellery

24K Gold Rate in India for November 2019: Week 4

The fourth week began with the gold rate in India holding at…

Due date to file annual GSTR-4 for FY 2019-20 gets further extended

The government has further pushed the deadline to file the brand new…