Massive Tax Cuts On Share Trading, Investment, Dividends Coming Soon; Will This Bring More FDI?

As markets reopened on the new year (Vikram Samvat), Govt has hinted that massive tax cuts are likely to be announced, very soon.

These tax deductions would be targeted for those who are into share and equity trading and investment, and likely to bring in more foreign direct investment in India.

Big Tax Rate Cut Likely For Equity Investors

As per an exclusive report by MoneyControl, Finance Ministry is right now working on a new model for tax rates, for those who make profits by selling shares.

These new tax deductions can be announced before Govt. presents their Budget in the month of February, 2020.

An unnamed Govt source said,  “Now a group of officials are preparing the groundwork which is likely to finalised by November-end,”

As per the incoming reports, Finance Ministry’s Revenue Department and NITI Aayog, along with senior Govt. officials are involved in this initiative to reduce taxes, for investors.

Which Tax Rates Can Be Reduced?

As per the report, three major taxes: Long Term Capital Gains (LTCG) tax, the Securities Transaction Tax (STT) and Dividend Distribution Tax (DTT) are being reviewed right now.

Long Term Capital Gains (LTCG) tax is paid by any share investor, when he makes profit by selling shares in the market. This tax of 10% is applicable only when the investor has kept the shares for more than 1 year, and when profits exceeds Rs 1 lakh.

In case the shares are sold within a year, and the profit exceeds Rs 1 lakh, then Short Term Capital Gains (STCG) tax of 15% is applicable.

Dividend Distribution Tax or DTT of 15% on the dividents paid is applicable when a listed company pays dividend to all shareholders, along with 12% surcharge and a 3% education cess.

On top of that, a domestic company is also required to pay DTT of 15% on the amount declared, distributed or paid in the form of dividends to its shareholders. This is clearly a case of double taxation, which can be removed or reduced.

The unnamed Govt source said, “The Finance Ministry wants to announce it in the coming Budget. But once the proposals are finalised, the PMO may push for an early announcement even before the Budget,’’

As per initial estimates, reduction or removal of these taxes for share market investors will result in loss of Rs 1.5 lakh crore of tax revenues, per year.

We will keep you updated, as more details come in.