REVISION
– THE HINDU – EDITORIAL NO.8-JUNE 2018
8.
What is LTCG?
LTCG
or long-term capital gains refer to the gains made on any class of asset held
for a particular period of time.
In
case of equity shares, it refers to the gains made on stocks held for more than
one year. In other words, if the
shares
are bought and held for more than a year before selling, then the gains, if
any, on the said sale are referred to
as
long term capital gains or LTCG.
Why
is LTCG tax in the news?
It
is in the news as Finance Minister Arun Jaitley re-introduced LTCG tax on
equity shares.
Investors
have to pay 10% LTCG tax on gains exceeding ₹one lakh on the sale of shares or
equity mutual funds held for
more
than one year.
Previously,
short-term capital gains (STCG) tax of 15% was levied.
The
Centre said if the gains exceeded ₹one lakh in a year, then 10% LTCG tax had to
be paid without the benefit of
indexation
(adjusting the profit against inflation to compute the real taxable gains).
Was
the tax levied on stock market trades earlier?
Such
a tax existed until October 2004 when it was replaced by the securities
transaction tax (STT) which was levied on
all
trades made on the stock exchanges.
The
introduction of LTCG tax can only increase the cost of trading stocks at a time
when various market participants have
been
highlighting the ‘export of capital’ to other countries due to lower
transaction costs in those nations.
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