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Stock brokers seek status quo on long-term capital gains tax

LTCG are profits on sale of shares on a stock exchange platform after a holding period of at least a year

Shrimi Choudhary  |  Mumbai 

stock exchange

Association of National Stock Exchange Members (Anmi), the body of brokers on the bourse, has opposed a recently aired recommendation to remove the exemption on long-term capital gains (LTCG) tax.

representatives met the chairman of the Central Board of Direct Taxes to urge no change in the tax structure for the capital

"Doing away of the benefit will have a major impact on institutional investors and impact trading volumes significantly," said K Suresh, president of

has recommended an end to the tax exemption, which took effect from 2005. has said the exemption causes a loss of Rs 49,000 crore annually to the exchequer; both exchanges say the rebate is being misused to launder undisclosed wealth.

are profits on sale of shares on a stock exchange platform after a holding period of at least a year. Short-term capital gains are profits on sale of shares held for less than 12 months and these are taxed at a flat 15 per cent.

Talk on removal of LTCG tax benefits have gained momentum after the government named thousands of companies or penny stocks as possibly misusing the stock exchange platform to evade tax. In August, the ministry of corporate affairs identified 331 suspected shell companies as allegedly making illicit gains under the guise of tax benefits. Subsequently, the income tax department began probing 2,000-odd new cases in this regard.

Some suggest the government put a threshold limit for availing of the benefits. It could also raise the holding period to two or three years, from one year at present.

Among other issues, also wants some rebate on Securities Transaction Tax (STT). "has impacted volumes and revenue generation, and increases the cost of transaction for clients," said Suresh.

Anmi notes that inspite a five-fold rise in market capitalisation, collection remains muted. According to it, the government collected Rs 8,358 crore from in 2015-16, fromt Rs 7,350 in FY15.

The brokers body has suggested reintroduction of section 88E for a rebate on STT paid. Anmi says its absence has meant a migration of volumes to the Singapore exchnage. Also, as profit is taxed, it says, dividend distribution tax should be abolished.


First Published: Thu, December 07 2017. 04:15 IST