The late tax guru Subhash Lakhotia had once said, “There is no equality in the tax treatment between investments in bank deposits and in stock markets.” While the interest earned on deposits is subject to tax under the IT Act, there is no tax on the dividend earned on stock market securities, mutual funds, etc.
While profits earned on the sale of securities held for a short term are subject to capital gain tax, there is no capital gain tax on the sale of securities held for a long term or for more than a year. For equilibrium in investment portfolios, there should be no tax on interest earned on long-term deposits on a par with stock market investments.
While Prime Minister Narendra Modi wanted taxmen to think about the contribution of market participants to the exchequer, Finance Minister Arun Jaitley said the media had wrongly interpreted the PM’s move and that the government had no intention to impose tax on the sale of securities held for the long term. Jaitley said a high tax regime had led to higher tax evasions and that necessitated lower taxes and a tax-friendly environment.
If Jaitley is sincere, in the Budget he should withdraw income tax on all kinds of deposits. That would not only help depositors but also reduce the avoidable workload at banks. It would also help investors get a level playing field for investments in banks and/or in stock markets.
Ramanath Nakhate Mumbai
