Reserve Bank of India (RBI) Governor expressed concern over the government’s move to reintroduce long-term capital gains tax on equities.
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The Budget had brought back long-term capital gains tax, disappointing investors.
India’s investment-to-GDP ratio was not adequate, Governor observed, given the fact that capital in the country was taxed at five different stages, hindering investments.
The Budget has proposed that long-term gains of more than Rs.1 lakh from investments in stocks, would attract long-term capital gains tax at 10%.
“We need to keep in mind the taxation on capital in India is from several sources and I think, at the marginal rate, it adds up … so from back of the envelope you have a corporate tax rate, you have a dividend distribution tax rate, for dividend income above Rs10 lakh you have the marginal tax rate, you have a securities transaction tax and a capital gains tax. So, you have five taxes on capital. And you know that would have an impact on investment and savings decisions,” he said.
The Economic Survey, released last week, also pointed out that the overall savings and investment rate scenario in the economy was not ‘heartening’.