Skip to main content

Short-termcapital gains tax rate may rise in Budget

Higher levy on dividend searned by individualsal so on govt’sradar
The government is mulling a hike in the short-term capital gains (STCG)tax rate,and also a higher levy on dividends earned by individuals.
At present,the STCG (profits on sale of shares held for less than 12 months)tax rateis15 percent;the government is planning to increase it to 20 percent, according to sources in the know.The Centre has already started gathering feedback from key market participants.
Also, although the Finance Minister Arun Jaitley ruled out changes to the long-term capital gains(LTCG)—currently tax free—the government is toying with the idea of increasing the time frame for availing such benefits from 12 to 36 months.
The government is taking securities market regulator Securities and ExchangeBoardof India’s(Sebi’s)and stock exchanges’ views on the proposals to change the tax structure in the capital markets.Announcement regarding this could be a part of the Union Budget on February1, 2017.
On Saturday, Prime Minister Narendra Modi, at a Sebi event in Mumbai,hadsaid,“Those who profit from financial markets must make a fair contribution to nation-building through taxes.For various reasons,the contribution of tax from those who make money on the markets has been low.” He also said,“Low or zero tax rates are given to certain types of financial income.Icallup on you to think about the contribution of market participants to the exchequer.” The markets reacted negatively to it on Monday,despite Jaitley’sclarification on Sunday.
Sources said the government is considering taxing dividend income of individuals according to taxs labs applicable to them.
Currently,besides the dividend distribution tax(DDT)paid by the companies,an additional 10 percent is levied on individuals earning dividend income in excess of Rs.10 lakh annually.The move could increase the effective tax on dividends to 30 percent for those in the high-income bracket.
Market players said the taxes on dividends are already high and a further increase could impact dividends payouts.
“The DDT is already tripled -taxed,as it is paid on profit after tax by a company.If the government keeps increasing taxes on dividends,the company will insteadstarto pting for share buy-back.We have seen that play out already after the government levied an extra10 percent DDT in last year’s Budget,” said Ramesh Damani,member,BSE.
The government will first try to assess the impact of increasing this rate by five percentage points on investments, said a source.
Market players said increasing STCG would be a double wham my for investors,as they are currently paying securities transaction tax(STT) on all trades.
“I don’t think there is a need to change the design of capital gains tax.The objective behind STT was to simplify tax collection from securities,” said Sudhir Kapadia, national tax leader, EY.
He said the government can look to focus on curbing tax evasion through investments made in penny stocks by improving the surveillance standards.
Currently, the government collects aroundRs.7,400croreannuallythroughSTT.
The government has also asked stock exchanges to suggest measures to crack down on tax evasion through penny stocks. The exchanges have submitted their recommendations to the finance ministry.
The move came in the wake of increasing tax manipulation cases in the stock market.The income tax department has so far detected tax evasion worth about Rs.38,000 crore involving around 1,000 entities,in dealing with penny stocks.The amount has been arrived at through investigation of cases of stock manipulation in the past two years.
Business Standard New Delhi,27th December 2016

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s