Summary-The Hindu-Taxes on Capital Hitting Investments

TAXES ON CAPITAL HITTING INVESTMENTS

Author: Manojit Saha

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The Union budget has reintroduced the long-term capital gains (LTCG) on equities. As per RBI governor Mr. Urjit Patel, India’s investment-to-GDP ratio is not adequate given the fact that the capital in the country is taxed at five different stages thus hindering investments.

The five taxes:

  1. Corporate tax rate
  2. Dividend distribution tax rate
  3. Marginal tax rate (for dividend income above Rs. 10 lakhs)
  4. Securities transaction tax
  5. Capital gains tax

The Budget has proposed that long-term gains of more than Rs. 1 lakh from investments in stocks, would attract long-term capital gains tax at 10%.

The Economic Survey has also pointed out that the overall savings and investment rate (as a share of GDP) scenario in the economy was not ‘heartening’.

Additionally, the ratio of gross fixed capital formation to GDP rose from 26.5% in 2003, reached a peak of 35.6% in 2007, and then slid to 26.4% in 2017.

Imposition of the LTCG tax may dishearten investors and affect the investment in a negative manner.

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