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:
- Corporate tax rate
- Dividend distribution tax rate
- Marginal tax rate (for dividend income above Rs. 10 lakhs)
- Securities transaction tax
- 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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