To further improve market sentiment, the government is mulling over changes in income tax implications on equity investment, reported a leading business channel, citing sources. As per the report, different taxes that apply on equities such as long term capital gains or LTCG tax, STT or the securities transaction tax as well as DDT or dividend distribution tax are being reviewed. Last month to revive corporate confidence which was bogged down after dismal GDP numbers of 5% for the quarter ended June, FM Nirmala Sitharaman announced sharp cut in corporate tax rate.
In Budget 2018, LTCG tax on sale of shares and equity mutual funds after a holding period of one year was re-introduced with a grandfathering clause. If the gains made in a financial year exceeded Rs. 1 lakh in value, LTCG @ 10% shall apply.
Securities transaction tax (STT) introduced with effect from October 1, 2004 apply at the time of purchase and sale of securities that are listed on Indian stock exchanges. STT is charged depending on the type of security traded. In delivery based trade, at the time of both purchase and sale of equity, you are required to shell out 0.1% of share value as STT.
Further, there is dividend distribution tax or DDT which is charged to dividend paying domestic companies. The effective rate is 20.35% that is inclusive of education cess and surcharge. There are reports doing the rounds which suggests that PMO and the Finance ministry are working out ways that may even result in the withdrawal of DDT.
The buzz around likely changes to income tax structure on equities cheered domestic market that saw the benchmark BSE Sensex climbing by 580 points to end trading day at 39831.84, while Nifty scaled close to 11800 points, with gains of 1.37% or 159.70.