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Centre is expected to revamp
the capital gains tax structure in the next budget to augment revenue
collections and boost spending on welfare schemes, LiveMint reported on
Tuesday citing two officials privy to the matter.According
to the proposal, which is reportedly being studied in the finance
ministry, the Narendra Modi-led government’s philosophy is that passive
income earned from the capital market should not be taxed at a lower
rate than income earned from doing business, which involves taking
entrepreneurial risks and job creation.The government wants to boost revenue from the capital market to support welfare activities, the report said.Currently,
long-term capital gains (LTCG), which was was introduced with effect
from 1 April 2019, on listed equities held for more than a year is taxed
at 10 percent on profits above a threshold of Rs 1 lakh.On the other hand, short-term capital gains on listed equities held for less than a year is taxed at 15 percent.“Making
the capital gains tax structure more efficient needs legislative
amendments. This may be taken up in the next budget as it cannot be done
out of the blue," LiveMint quoted as saying one of the officials cited
above.Another official, on condition of anonymity,
said taxation and benefit transfers were two levellers as far as
tackling income inequality is concerned. “In India, we do not have the
data, but experience from countries such as the US, where data is
available, suggests the picture of post-tax, post-transfer income
inequality is quite different from the one painted by data on pre-tax,
pre-transfer income inequality," the official said.The
government estimates that long-term capital gains are taxed in many
countries at the 25-30 percent range, or the applicable income tax
rates, the government said.Higher capital gains
tax in India when compared with other emerging market economies could
reduce the country’s relative attractiveness as an investment
destination and encourage Indians to invest in other assets.
