Capital gains tax: The cabinet on Wednesday, June 3, in a meeting chaired by Prime Minister Narendra Modi, discussed a significant cut in the taxes paid by global funds on the nation’s bonds, the people said, asking not to be identified as the details are private. The cabinet will also consider whether it should eliminate the 20 per cent levy on interest earned from bonds, or reduce it to a bare minimum, said a report by Bloomberg.
If India scraps capital gains tax on investments in government securities by foreign portfolio investors (FPIs), it can shore up overseas capital inflows into the country. Centre also seeks to mitigate the effects of the Iran war on the economy, said people familiar with the matter.
The report comes at a time when the rupee has come under pressure from foreign fund outflows, elevated oil prices and global trade uncertainties. Here are the highlights.
Foreign investors are subject to a long-term capital gains tax of 12.5 per cent on listed shares and bonds held longer than 12 months. A withholding tax of 20 per cent they pay on interest earned in government bonds may also be removed, the source said.
Earlier, the ace investor Vijay Kedia wrote to Finance Minister Nirmala Sitharaman with a set of suggestions aimed at strengthening India’s capital markets, including a proposal to abolish long-term capital gains (LTCG) tax on listed equities.
In his letter, Kedia argued that long-term investors should be viewed as providers of patient risk capital rather than speculators. According to him, investors who stay invested in businesses for years help companies expand, generate employment, innovate and contribute to India’s economic growth.
ET Now asked Finance Minister Nirmala Sitharaman whether the government is considering a review of equity taxation. The FM said the government is open to hearing investor concerns regarding stock market taxation. Speaking to ET Now, she further confirmed that the government has already received representations on issues related to equity taxation.
