[Image Source: Forbes India]
Direct Tax Code (DTC) India: Long Term Capital Gain Tax and Wealth Tax
The Direct Tax Code (DTC) will be implemented in India from April 2012 and there are lots of rumours and predictions about this new DTC.
Two such common predictions/rumours about DTC are,
01) Long Term Capital Gains Tax and
02) Wealth Tax
Both of these taxes are highly in gossips right now. The smart people of India used to save lots of capital gains tax up to now. But after DTC implementation, this scenario may change.
Right now, the long term capital gain tax (More than 1 year) on Equity and Equity related investments is 100% Tax-Free. But after DTC, the long term capital gains tax will be completely abolished and the equity investors may have to pay as high as 30% capital gains tax on their long term capital gains tax according to Forbes India.
Right now Wealth tax exemption is just Rs.3 lakhs. But after DTC, it will be increased to Rs.50 Crores and above 50 Crores 0.25% only. So if you have a wealth of Rs.51 crores than you will be liable to pay only Rs.25,000 of annual tax on it. Isn’t it great?
But wait. After increasing this wealth tax limit, your shares including promoters holding will also be considered under the definition of wealth. Thus, all of your shareholdings will also be considered as your wealth.
However, the STT (Securities Transaction TAX) of 0.25% will be eliminated.
The only problem with implementing the long term capital gains tax on 30% is that, the Equity will become less lucrative investment. Well, in my opinion, investors invest in equity and take the risks. So they should be awarded with some tax benefits for taking this risk. If the long term capital gains tax will be charged as high as 30% by including it in your income, than this will definitely affect the Indian economy in the long run and the small investors (Which is the larger portion of India) won’t get motivated to invest in equity.
What is your view point about this?
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