Removal of 10% Long term Capital Gains (LTCG) Tax

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Long term capital gains exceeding Rs 1 lakh on sale of equity shares/units of Equity oriented Fund are proposed to be taxed at 10% without allowing any indexation benefit, said Finance Minister Arun Jaitley in Lok Sabha during his Budget speech.

Dear Finance Minister Sir Investors are already paying a lot of taxes to the government in various forms like these:

  1. Securities transaction tax (STT): The securities transaction tax or STT is a turnover tax that an investor has to pay on the total consideration paid or received in a transaction in stock futures and options. STT was introduced in Union Budget 2004 and implemented from October 2004.
  2. Capital gains tax: Any profit earned by selling a security asset is considered capital gain. At current rate, gains from transactions in shares held for less than 12 months are considered as short-term capital gains and are subject to a 15% levy. In case of debt mutual funds, both short-term and long-term capital gains are taxed. Short-term capital gains on debt mutual fund are added to annual income and taxed as per the individual’s income-tax slab while long-term capital gains on debt mutual funds are taxed at 20 per cent with indexation and 10 per cent without indexation.
  3. Commodities transaction tax: The commodities transaction tax or CTT was introduced in FY2013-14. It is levied on the futures contracts of non-agricultural commodities at 0.01 per cent of the cost of the trade.
  4. Dividend distribution tax: The dividend distribution tax (DDT) is a levy charged by the government on companies according to the dividend paid to investors. The dividend amount is tax free in the hands of investors. However, DDT is charged at 15 per cent on the dividend declared by the company.

  5. Dividend tax: Budget 2016 proposed that in addition to DDT paid by companies, a tax at the rate of 10 per cent of gross amount of dividend will be payable by the recipients, that is individuals, HUFs and firms receiving dividend in excess of Rs 10 lakh per annum

  6. Health & Education Cess: the education cess of 3% has been proposed to be increased to 4% and renamed as 'health and education cess.

Investors sentiment is shaken by government's decision to impose 10% on LTCG which was clearly visible with biggest single day fall of the index since August 24, 2015 on Friday, when it had fallen by 1,624.51 points.

Investors wealth was eroded by Rs 4.6 lakh crore amid massive selling in the stock market where the BSE benchmark index plummeted 840 points. Experts are expecting further fall in the markets therefore we request government to withdraw 10% LTCG and consider increasing the term for long term but do not be hard on investor community because as someone said, "Investors raise the capital of companies and business allowing them to expand and eventually lead to job creation and adding more services or products adding much significant value to the society. isn't it the main motive of the government too?"