‘LTCG tax to keep financialisation of corporate savings in check’
Indian Express
February
05, 2018
Finance secretary Hasmukh Adhia said the imposition of LTCG
was done in a “mild and modest way and without disturbing the stock market.”
Claiming
that the imposition of the long term capital gains (LTCG) tax protects the
“small retail investors” and keeps a “financialisation of corporate savings” in
check, finance secretary Hasmukh Adhia said on Sunday that keeping one set of
investments outside the tax net would give rise to a “potentially dangerous
situation.”
“Lot
of people used to tell us, please, there is one very good story going in India
of the stock market becoming bullish. Don’t disturb that good story. Then there
were others who used to tell that this is the best time to do it… We have not
disturbed it (the stock market) at all… Look here, you tell me. Is there any
logic of keeping one class of investments, completely out of the tax net,”
Adhia said while addressing a gathering at the Indian Institute of Management
here. He said that the stock market has been giving about 15 per cent returns
for the last few years.
“The
finance minister in his speech has mentioned that in FY17 — which is reported
in 2017-18 assessment year — the companies and individuals have reported long
term capital gain of Rs 3.67 lakh crore and we analysed it further, most of it
is earned by corporates and trusts; very little by individuals,” Adhia said.
“The
corporates are very happy investing their surplus money in mutual funds and
equity markets of other companies, rather than using that surplus to create a
new manufacturing company… So what was happening was financialisation of
corporate savings, which is not a good thing for the economy. So we decided to
do it, 10 per cent to begin with and we also said that for small investors
whose gains are up to Rs 1 lakh per annum, long term capital gain will be
exempted… so the small retail investors are protected,” he added.
Adhia
said the imposition of LTCG was done in a “mild and modest way and without
disturbing the stock market.” He felt that the crash of the Sensex after LTCG
tax was due to fall in global markets. “But if you do not do this and you allow
one set of investments to be so attractive that the whole world runs towards it
then it is potentially dangerous situation. All we are saying is … if you are earning
15 per cent in long term capital gain, then we are saying give 1.5 per cent to
us that’s all. 13.5 per cent return is still there,” he added.
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