Take a look at this shocking statistic. More than 3 Lakh investors dealing in listed equity shares and mutual funds have evaded long term capital gains tax. The Tax Department has taken a serious note of this and recommended that the Government not abolish LTCG tax.
From April 1st 2018 the sale of equity-oriented funds and shares attract a 10% LTCG tax (plus cess) if long term capital gains are more than Rs 1 Lakh.
Take a look at another fact. Around 2.5 Lakh investors (This is 44% of individuals who sold shares and mutual fund units) either reported zero or substantially lower values in their ITR. This is in spite of transactions adding up to Rs 4 Lakh Crores.
Want to know more on Tax Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
This is one of the few ways to track people who have evaded taxes. If they have huge money to invest in equity, how is that they are not paying taxes? Penny stocks are used to launder black money and can be tracked through the LTCG tax route.
LTCG tax is a standard across the World. It is levied by countries like US, Canada, Australia and China. Tax ranges from 10-30% on profits earned on shares and mutual fund units. So, this demand of withdrawing LTCG on equity funds doesn’t hold ground.
See Also: What to Expect From Union Budget 2020?
It’s an excellent idea to completely remove the LTCG tax. It’s great if savings can be exempted from taxation at the time of investment and made exempt even when it grows. Only income withdrawn is taxed. If the monetized savings are reinvested in an asset, the savings too must qualify for the tax exemption. Only that portion of gain which is not reinvested in an asset is taxed at the applicable marginal rate. Why not abolish both short-term and long-term capital gains?
This could encourage healthy participation in the stock markets. Stock investors would reduce churning as there is no short term and long term capital gains to fear. The basis is simple. If gains are reinvested, they must not be taxed.
See Also: Union Budget 2019-2020: Major Takeaways
Abolishing long term capital gains boosts household savings. This encourages more people to invest in financial assets, instead of physical assets.
Equity investments are rising and more people would be encouraged to take up equity, if LTCG Tax is abolished. After demonetization a lot of money flowed into equity. After LTCG tax in 2018, this flow has greatly reduced. The Government can abolish LTCG tax on equity funds to bring back the stock markets to its boom period.
The Government won’t abolish LTCG Tax on equity funds because:
You May Also Watch
Keep your Financial Cognizance up to date with IndianMoney App. Download NOW for simple tips & solutions for your financial wellbeing.
Have a complaint against any company? IndianMoney.com's complaint portal Iamcheated.com can help you resolve the issue. Just visit IamCheated.com and lodge your complaint. If you want to post a review on any company you can post it on Indianmoney.com review and complaint portal IamCheated.com.
Be Wise, Get Rich.
This is to inform that Suvision Holdings Pvt Ltd ("IndianMoney.com") do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.