Though the intention was to tax LTCG, there are various nuances in the provisions that need to be reconsidered even though clarified by the tax department
Budget 2018 was the last full-fledged budget presented by the government led by Narendra Modi. The 2018 budget introduced various provisions and reforms as far as income tax was concerned, to provide a push to the growing Indian economy. The provisions ranged from reducing income tax rates for domestic companies satisfying prescribed conditions, to introducing the Health and Education Cess at the rate of 4 percent (effectively increasing the rate of cess by 1 percent) to providing enhanced benefits to the start-up industry. One of the most discussed provision that caught the attention of majority of taxpayers was the re-introduction of the Long Term Capital Gains (LTCG) tax on profit earned from sale of equity shares listed on a recognized stock exchange in India.
The LTCG tax was re-introduced after a time gap of 14 years. The provisions were closely followed since they impacted majority of taxpayers of the country. The tax was levied at the rate of 10 percent (plus applicable surcharge and cess) while providing relief from gains accrued up to January 31, 2018, i.e., a mechanism was derived wherein the stock price as on 31 January 2018 was considered as the deemed cost, provided it is beneficial to the taxpayer. Thus, the provisions were prospective in nature and not retrospective. Though the intention was to tax LTCG, there are various nuances in the provisions that need to be reconsidered even though clarified by the tax department. They also need to be clarified in view of the ambiguity involved. Following are some of the illustrative points:
Apart from the above expectations on clarifications of the income tax provisions, it is expected that the interim Budget to be presented on 1 February, can introduce various reforms that may act as a booster to fasten the growth of the Indian economy.
Harsha Rawal is Director with Deloitte Haskins & Sells LLP; and Parth Shah is Deputy Manager with Deloitte Haskins and Sells LLP
First Published: IST