Rich made the bulk of long-term stock gains in FY20: Revenue Secretary

Long-term capital gains on shares held for more than one year are taxed at 10% on the part of these capital gains exceeding a threshold of ₹one lakh. This provision was introduced with effect from 1 April 2019.

Addressing business leaders at a post-budget interaction in Chennai led by Finance Minister Nirmala Sitharaman, Bajaj said that in 2019-20 people have made ₹95,000 crore long-term capital gain.

“Can you beat that? 80% of this long-term capital gain was realized by people earning ₹50 lakh and up,” Bajaj said in response to a suggestion from an industry representative asking for long-term capital gains tax relief on shares.

Bajaj raised the issue of income inequality while rejecting the suggestion of relief that could only benefit high-income groups. If relief is granted, it will only go to high-income earners following the trend.

“I can assure you it won’t be 80%, it will be 90%, like people have been trading in the market this year. I think if we compare with other countries, you will notice that other countries charge LTCG at the applicable rate (depending on the panel) or 25-30%. That’s the kind of taxes. In India we have 10%,” Bajaj said, adding that providing long-term capital gains tax relief would only increase money in the pockets of the few.

Earlier this month, Bajaj said the capital gains tax regime had become too complicated and needed a revamp. The government has done some preparatory work comparing the capital gains tax regime in India and other countries and wants to revamp the regime to make it simpler. Furthermore, the stated policy of the government is to move from tax breaks to a simpler and lower tax rate regime.

The capital gains tax regime prescribes the holding period to determine whether the gain realized on the sale of the asset is short-term or long-term. Short-term capital gains are taxed at a higher rate than long-term capital gains.

The holding period and the tax rate differ between asset classes, whether real estate, moveable assets such as jewelry, listed stocks and mutual funds focused on stocks. equity or debt-oriented mutual funds.