As one of the reactions from the government to the unhappiness among the investing community, there are indications that the provisions in the long-term capital gains (LTCG) tax may be eased or even withdrawn. This may be a part of an overall package the Union Finance Ministry is said to be working on currently for the capital markets, according to an ET Now report. The markets have been in a virtual turmoil ever since the Finance Minister introduced am income tax surcharge on the foreign portfolio investors (FPIs). Reports now say the government may revisit this surcharge provision too.
The long-term capital gain (LTCG) provision was introduced in the 2018 budget. It introduced a tax of 10% on gains made in selling equities if the gain was above Rs 1,00,000. This provision had existed before but was removed and now re-introduced after a gap of 14 years. The fresh reports quoting the Finance Ministry officials claim that the government may slightly tweak this provision to have the allow for an exemption from payment of the 10% levy if the investor holds on to the equity for 3 years and above.
Markets may welcome such a move and there is hope that positive sentiments may reverse the falling trend in the indices. The perception would be that investors with long-term objectives to stay invested are respected by the government.
The other issue of the income tax surcharge on FPIs too, has been taken up by the government for reconsideration. There are even suggestions that the government may agree to withdraw this new levy. The stock markets reacted quite violently the FM’s proposal on FPIs. The total market capitalization, which stood at Rs 151.35 lakh crore on the day of the Budget fell to Rs 138.82 lakh crore, a loss of Rs 12.53 crore.