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Translating…

The upcoming Budget may have a proposal whereby profits from the sale of equity shares held for two or three years will not attract long term capital gains tax, according to a CNBC Awaaz report, quoting sources.

At present, profits on equity shares sold within one year from the date of purchase attract short term capital gains tax of 15 percent and profits on shares sold after one year attracts a long term capital gains tax of 10 percent plus cess.

The draft for providing relief on LTCG is in the pipeline and may provide relief to mutual funds, venture capitals and on equity and non-equity investments, the report stated.

Some relief may also be provided on short-term capital gains. Sources told the channel that STCG up to one year will attract 15 percent tax.

The government had introduced LTCG on sale of shares and equity-oriented mutual funds on April 1, 2018, under which investments held for over a year would attract LTCG at a flat rate of 10 percent (plus cess at 4 percent) without the benefit of indexation.

Relief on LTCG on equity has been a long-standing demand of investors.

“Among other things, we anticipate Budget 2020 to bring further clarity about exchange traded funds (ETFs) becoming tax deductible under Section 80C. Increase of the maximum deductible allowance under Section 80C from Rs 1.5 lakh to Rs 2 lakh (or even higher) is also a popular expectation that we think may play out in the upcoming budget. Both these moves will certainly boost capital market in the short to long term. The rumoured removal of LTCG tax, be it for a year or two, will spur domestic and foreign investment if implemented,” said Vasanth Kamath, CEO and Co-Founder, smallcase Technologies.

“Ever since long-term capital gains tax of 10 percent without indexation on profits made above Rs 1 lakh on selling of equity shares and mutual funds were introduced in Budget 2018, the same has not gone down well with industry stakeholders. To infuse capital in the economy and boost investments, Budget 2020 should reconsider this provision,” said Rahul Jain, Head-Personal Wealth Advisory, Edelweiss.

“There could be two options: either a complete withdrawal of LTCG tax or increase in the threshold limit. Opting for either of these would revive sentiment of domestic and foreign institutional investors. FIIs pumped in more than Rs. 1 lakh crore into equities last year, making it the best infusion in the past six years. Any measure to ease the LTCG burden can go a long way in driving the growth of the domestic equity market,” he added.

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