Rich earned most of the long-term capital gains from equities in FY20: Revenue Secretary

Long-term capital gains on equities held for more than one year are taxed above the limit of 10% on part of such gains Hundred Thousand. This provision was implemented with effect from 1 April 2019.

Addressing the business leaders in the post-budget talks in Chennai under the leadership of Finance Minister Nirmala Sitharaman, Bajaj said that in the year 2019-20, people 95,000 crore long term capital gain.

“Can you beat it? 80% of that long-term capital gains were made by the earners.” 50 lakh and more,” Bajaj said in response to a suggestion by an industry representative seeking relief on long-term capital gains tax on equities.

Bajaj rejected the suggestion of relief and referred to the issue of income inequality which could have benefited only the higher income group. If any relief is given, it will tend to go only to high income earners.

“I can assure you, it will not be 80%, it will be 90%, the way people have traded the market this year. I think if we compare ourselves with other countries, you will see that other countries are charging LTCG at the applicable rate (as per slab) or 25-30%. These are a type of tax. We have 10% in India,” Bajaj said, adding that extending long-term capital gains tax relief will only add money to the pockets of a few.

Earlier this month, Bajaj had said that the capital gains tax regime has become too complex and needs to be revisited. The government has done some groundwork comparing the capital gains tax regime in India and other countries and seeks to reform the system to make it simpler. Further, the announced policy of the government is to move away from tax breaks to a simpler and lower tax rate regime.

The capital gains tax regime determines the holding period to determine whether the gains received at the time of selling the asset are short term or long term. Short term capital gains are taxed at a higher rate than long term capital gains.

The holding period and tax rate vary according to asset classes, be it property, movable assets such as jewellery, listed shares and equity-oriented mutual funds or debt-oriented mutual funds.