Brokers seek tax cuts to boost equity flows

Representative body wants removal of dividend distribution tax, LTCG on shares

With just a little over two months left for the Union Budget to be presented in Parliament, market participants have again initiated efforts to convince the government to lower trading costs and offer certain tax rebates to investors in a bid to enhance the equity investment culture in the country.

The Association of National Exchanges Members of India (ANMI), in its pre-Budget memorandum submitted to the government, has sought the lowering of the securities transaction tax (STT), along with bringing back a tax rebate that was available earlier in lieu of the tax paid by investors. ANMI has also sought the removal of dividend distribution tax as also the long-term capital gains tax on listed shares, which was introduced last year.

Incentivising investment

“We are of the view that for enhanced GDP growth, we will need to incentivise and encourage equity investment,” stated the ANMI memorandum.

“Our submission covers issues which have large impact on stock market trading, like reintroduction of rebate under erstwhile Section 88E for STT and CTT (commodities transaction tax) paid, and reduction in rate of STT to tackle increased transaction cost, withdrawal of dividend distribution tax (DDT) and restoring exemption of long-term capital gains tax on listed shares,” it added.

According to ANMI, while the tax — STT and CTT — rates have remained high, a withdrawal of rebate under Section 88E and introduction of Goods and Services Tax have raised trading costs. Under the erstwhile Section 88E, entities could avail tax benefits on income generated through transactions on which STT was paid.

“Tax incentives, by reducing STT and CTT, removal of LTCG and DDT on corporate earnings will help create positive sentiment, which will further give fuel to the domestic capital market,” said Puneet Maheshwari, director, Upstox, a discount broking firm.

“Steps to encourage and channelise household investments to equity markets should be announced, which still remains largely untouched and can create a much-needed stimulus for a sustained economic growth,” he added.

ANMI is of the view that the current form of DDT was ‘adversarial’ in nature, leading to double or triple taxation of corporate earnings. While DDT was levied on the company, if a shareholder received more than ₹10 lakh in dividend in a financial year, then there is a dividend tax was levied on the earnings.

The association has suggested that the dividend should be taxed only in the hands of the receiver and the company can deduct it at source.

Meanwhile, the broker lobby has also sought restoring LTCG benefits on equities, which was withdrawn as part of the Finance Bill 2018.

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Printable version | Feb 18, 2020 6:06:38 PM |

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