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Budget 2020: Dinesh Kanabar & SP Tulsian discuss changes proposed in tax structure for equities, capital gains

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Budget 2020: Dinesh Kanabar & SP Tulsian discuss changes proposed in tax structure for equities, capital gains

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Dinesh Kanabar, CEO of Dhruva Advisors is of the view there is a need to relook at the capital gains tax on equities.

The government is likely to announce a slew of changes in the tax structure for equities, and capital gains on sale of property in the Union Budget that would be presented on February 1, 2020, say sources to CNBC-TV18.

Discussing this in detail, Dinesh Kanabar, CEO of Dhruva Advisors said, “When the Prime Minister was in New York, he had a meeting with the CEOs of US Inc and he committed in that meeting that he is relooking at capital gains tax structure in India and wants to make it consistent with best practices globally. Therefore, there is indeed a high expectation that something would happen on this front."
“However, the number of changes that have been made from time to time on capital gains structure, it has actually become very unwieldy. We have multiple asset classes with different rates of tax and different holding period and there is no need to make it complex, it can be very simple,” said Kanabar, adding that to say that 12 month is long-term, doesn’t make sense. For something to be classified as long-term, the minimum holding period should be 2 years. We have 3 years already for real estate. There is no need to say equity is going to be one year.
Talking about abolition of capital gains tax on equities, Kanabar said, “This was introduced 2 years back, and since then the collections on this account have been very meager and mainly, on account of grandfathering and also on account of the way the market has evolved. So maybe there is a need to relook at the entire thing.”
When asked about LTCG, Tulsian said, “I am hearing in media that government is contemplating to extend the period of exemption from 12 to 24 months, but this seems to be a half statement. We should say that after extending it to 24 months, the Long Term Capital Gains (LTCG) Tax will be tax-free and if that is the thought process of the government then this is an excellent move.”
Kanabar is not sure that the government might do away with capital gains on sale of property in the budget. Meanwhile, Tulsian said, “If this happens then it would be a pragmatic move. This has to be seen as move for creating industrialization and more for creating jobs rather than seeing this as a  move to revive or give some boost to the real estate market."
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