In a bid to extend the feel-good factor ahead of the ensuing general elections, Union finance minister Jaswant Singh has proposed to extend the long-term capital gains tax (LTCG) regime for another three years. |
"The regime of listed equities acquired on or after March 1, 2003, being exempt from long-term capital gains tax should be extended for a further period of three years, so as to provide stability," the finance minister said in his interim Budget statement yesterday. |
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The Union Budget 2003 had exempted capital gains arising out of shares in the BSE-500 index, purchased after March 1, 2003, and sold after holding for 12 months or more from payment of capital gains tax. |
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Most brokers had welcomed the government's decision to extend long-term capital gains tax on listed shares for three years. |
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"One big positive is that LTCG has been extended for three years," said Raamdeo Agrawal, managing director, Motilal Oswal Securities. |
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"Those who have invested since April 1, 2003, would have come for profit-booking after March 2004 and fresh investors would be scared to enter the market as the tax rate is high for short-term capital gains. Extension of LTCG for three years will mean the tax-free yield will go up which will substantially drive savings into equities again," said Kishore P Oswal, a leading tax consultant. |
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Hemang Raja, chief executive officer, IL&FS Investsmart, added, "The LTCG exemption for equity shares for three years more should go a long way in developing the equity culture among Indian investors who have traditionally become low-risk investors. Fiscal support for encouraging equity investment is required for achieving high growth plans of the Indian corporate sector." |
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Deena A Mehta, MD, Asit C Mehta Investment Intermediates, called it a positive indicator for investment in the secondary market. |
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"There is hardly anything negative in the interim Budget. The market should therefore digest the same and stabilise in a day or two. Several investors who were waiting for the announcements to book profits have done so. There is no cause of panic." |
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"The exemption from long capital gains announced last year has now been extended to a period of three years should spell good news for equity investors. This move will help in encouraging long-term participation into equities," said a fund manager with a mutual fund. |
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