After Budget 2018, will your stock investments be taxed?

NEW DELHI: On Monday, the equity market slipped sharply in the last hour of trading on media report that government may introduce long-term capital gains (LTCG) tax on stock investments. In the lead up to the Union Budget 2018, the

LTCG tax

can be one of the talking points. Here is an explainer on what the move, if it rolls out, may mean:

What is

LTCG

tax?

The LTCG tax, if implemented, will be levied on gains on shares sold after a period of one year. Currently, investors are exempt from taxes on them. Gains from equity holdings for short term (less than a year) are presently taxed at 15 per cent. The decks for roll out of LTCG tax have been cleared since 2009 but the previous UPA government and the current NDA government have refrained from implementing it in order to boost equity investments.

Why government might introduce it?

The government's finances at the moment are on a sticky wicket with the fiscal deficit breaching the annual target by November-end. GST revenue collection in November also slipped to its lowest point since the roll out of the new tax regime. The LTCG tax, if implemented will prove to be a boon as far as the state exchequer is concerned. The government was losing an estimated Rs 49,000 crore in taxes from LTCG exemption, the BSE said recently.

How will things change from the current state?
Currently,

STT

or Security Transaction Tax is levied in order to track equity transactions. However, STT is not applicable on commodity or currency transactions. With the

Sebi

's decision of bringing commodity and equity trading under the same roof from October next year, the LTCG tax might be applicable for them as well. Also, the STT generates only Rs 7,000-8,000 crore annually even as equity market monthly turnovers worth lakhs of crores.




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