What is long-term capital gains tax and why markets fell 1% even after Jaitley clarified PM Modi's comments
India's key equity indices opened up lower in morning trade on Monday after Prime Minister Narendra Modi on Saturday hinted at increase in taxes on income from stock markets during his speech in Maharashtra.
BSE Sensex and NSE Nifty lost over 1% in the morning trade on Monday.
At 11:05 hours, the 30-scrip Sensex index of BSE was trading down 0.81% or 211.36 points at 25,829.34.
At 11:04 hours, the 50-scrip Nifty index of National Stock Exchange (NSE) was trading dowm 0.89% or 71.45 points at 7,914.30.
ALSO READ: Markets lose 1% as Jaitley's long term capital gains tax clarification fails to calm nerves
Following Modi's statement, Finance Minister Arun Jaitley clarified on Sunday stating media reports of Modi's speech are erroneous, adding further that the government has no plans to introduce long-term capital gains tax on share transactions.
"The speech has been misinterpreted in some sections of the media which have started speculating that this is an indirect reference to the fact that there could be long-term capital gains (tax) on securities transactions," IANS reported quoting Jaitley as saying at an event in New Delhi.
ALSO READ: No plans to impose long-term capital gains tax on securities transactions: Arun Jaitley
"Now, this interpretation is absolutely erroneous, the Prime Minister has made no such statement directly or indirectly. I was present at the function in which this speech was given," Jaitley added.
According to Income Tax India website, long-term capital gains is any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.
According to PTI report, Modi during his speech in Maharashtra on Saturday, said, "Those who profit from the financial markets must make a fair contribution to nation-building through taxes. For various reasons, the contribution of tax from those who make money on the markets has been low. To some extent, it may be due to illegal activities and fraud."
ALSO READ: PM Narendra Modi hints at increase in taxes on income from stock markets; promises prudent reforms
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