From mint · Nishant Kumar · · 1m 30s
LTCG STT Tax Debate: Investors on Removal
Investors say LTCG tax removal could boost foreign capital but government remains hesitant.
In brief
Investors say LTCG tax removal could boost foreign capital but government remains hesitant. Ace investors Shankar Sharma and Rohit Srivastava argue removing LTCG tax for foreign investors would incentivize capital inflows while domestic investors need tax retention for long-term growth. Originally reported by mint.
Quick answers
- What's Next?
- Government may implement phased LTCG tax reduction to balance foreign capital inflows and domestic market stability.
- What is the key takeaway from LTCG STT Tax Debate: Investors on Removal?
- Ace investors Shankar Sharma and Rohit Srivastava argue removing LTCG tax for foreign investors would incentivize capital inflows while domestic investors need tax retention for long-term growth.
Tax Debate Intensifies
Finance Minister Nirmala Sitharaman said government is open to hearing views on LTCG and STT tax changes but remains premature to commit.
“the government is open to hearing views, it is premature to comment on possible measures at this juncture”
LTCG Tax History
Experts have advocated LTCG tax removal since its 2018 reintroduction, but government shows no willingness to change it now.
“experts and investors have been advocating for the removal of ltcg ever since it was reintroduced in 2018”
Recent Tax Changes
In 2024, government raised LTCG tax rate on listed equities to 12.5% from 10% and increased exemption threshold from ₹1,00,000 to ₹1,25,000.
“in 2024, the government increased the ltcg tax rate on listed equities and equity mutual funds to 12.5% from 10%, while also raising the exemption threshold from ₹ 1,00,000 to ₹ 1,25,000 per financial year”
STT Tax Impact
STT tax, introduced in India in 2004, applies to every trade and impacts intraday, short-term, and derivatives traders.
“stt, or securities transaction tax, which is charged at the time of executing a transaction of equities and derivatives, was introduced in india in october 2004”
Shankar Sharma's View
Shankar Sharma, founder of GQuant Investech, says capital gains tax is the pimple, not the tumour, and foreign investors should have low or no tax.
“i don't think the finance minister will remove the capital gains tax, but she might reduce it for overseas investors”
Rohit Srivastava's View
Rohit Srivastava, founder of Indiacharts.com, suggests phased LTCG tax reduction from 12.5% to 5% before zero to attract foreign capital.
“if the government is concerned about the revenue implications or the potential market impact, it could reduce the tax in stages - for example, from 12.5% to 5%, and eventually to zero”
Tax Impact on Investors
Removing LTCG tax for foreign investors could encourage profit booking but domestic investors would benefit from tax retention for long-term growth.
“if the government abolishes ltcg tax for both categories of investors, it would be a double win. domestic investors would also have a greater incentive to invest for the long term without worrying about capital gains tax”
What's Next?
Government may implement phased LTCG tax reduction to balance foreign capital inflows and domestic market stability.
“the government is open to discussion. she has not indicated that the government intends to abolish the tax”
At a glance
Ace investors Shankar Sharma and Rohit Srivastava argue removing LTCG tax for foreign investors would incentivize capital inflows while domestic investors need tax retention for long-term growth.
