The Chairman of Central Board of Direct Taxes Sushil Chandra explained the idea behind imposing a tax on LTCG (Long Term Capital Gains). He was the key person in making changes in the direct tax proposals of the Union Budget 2018-19.
In his interview with CNBC TV-18 he said that from the previous year returns the department saw that Rs 3,67,000 crore of LTCG was completely untaxed. "This was creating a bias against the manufacturing because the returns are very high and absolutely tax-free. Simultaneously, the treatment of LTCG vis-à-vis other assets is also in favour of the LTCG of the shares, so we thought that we should put some tax on the LTCG of the shares and equities because the market is absolutely mature," he said
He also said that with regard to the small and middle-level investors, the tax change is still in their favour as the LTCG on equity will be untaxed up to the limit of Rs 1 lakh.