EU Budget 2022 Expectations for Stock Markets and Mutual Fund Investors: Long-term capital gains tax relief for stock markets and mutual fund investors expected.

EU Budget 2022 expectations for stock market and mutual fund investors: The upcoming 2022 budget is expected to offer various long-term capital gains tax relief to stock markets and mutual fund investors. Experts believe that eliminating the LTCG tax on the sale of shares listed in India would boost investment through the stock exchange.

“The imposition of the Long Term Capital Gains Tax (LTCG) had shaken investor confidence. Long-term capital gains on the sale of listed shares in India should be exempted by the government. Alternatively, it could offer tax relief to investors who have held the assets for more than two years. Major economies do not have an LTCG tax. The government may consider removing this tax to stimulate investment through the stock exchange,” Tax2Win experts said in their budget forecasts for this year.

Saurrav Sood, international tax expert at SW India, said the disparity between LTCG and annual income up to Rs 5 lakh should be removed.

“For an individual, income is taxable at slab rates, which makes income up to Rs 2,50,000 tax exempt. Adding the standard deduction, marginal relief benefit and Section 80C benefit, there may be a situation where no tax is payable on income up to Rs 500,000 per annum. However, in the case of a long-term capital gain, this exemption cannot go up to Rs 100,000 only. This disparity should be addressed by raising the long-term capital tax exemption limit to a higher level,” Sood said.

READ ALSO | Income tax slab, rate changes expected in budget: Will basic exemption limit of Rs 2.5 lakh increase?

Sood added that the flat tax rate for an individual goes up to 30% at present. Such a high tax rate should be reduced, and the government should instead find ways to increase the tax base by tightening the criminal provisions for non-filing of tax returns. The larger the base of taxfilers in India, the more this argues for a reduction in tax rates, as the loss of revenue due to the reduction in tax rates will be compensated by a larger base of taxpayers and wider.

Simplify LTCG across all asset classes

Experts from the Confederation of Indian Industry (CII) also recommended the government to “simplify the taxation of capital gains to ensure consistency of tax rates and holding period across different asset classes. “.

Remove the concept of speculative income

Experts are of the opinion that the 2022 budget helps to create momentum in the stock markets and that all possible avenues must be considered by the government to achieve this.

“The government should remove the concept of speculative income and restrict the classification of income arising from financial market transactions to business income, long-term capital gains and short-term capital gains. We expect the government to consider a tax exemption of up to Rs 1,00,000 lakh on short-term capital gains tax as well as a tax exemption on dividends of up to Rs 50,000 for the elderly,” said Puneet Maheshwari, director of Upstox.

Maheshwari further said that the government may consider relieving traders of securities transaction tax (STT). “By doing so, new investors would be encouraged to start trading. There needs to be more participation in indices or exchange-traded funds. equity, the government can encourage long-term savings in Nifty or Sensex Greater allocation of provident funds and public pension funds to stock markets could also help.

Tax parity in ULIPs, MFs

The Association of Mutual Funds in India (AMFI) has proposed “to bring parity in the tax treatment of capital gains on the withdrawal of investments in ULIPs from life insurance companies and the redemption of units of mutual funds, in order to establish fair conditions of competition between ULIPs and MF schemes.

Justifying the proposal, AMFI said in its pre-budget suggestions that while ULIPs are considered insurance products for tax purposes, they are essentially investment products that invest in securities like mutual funds. placement but with insurance benefits.

“SEBI, in its “Long-Term Policy for Mutual Funds”, published a few years ago, had emphasized that similar products should receive similar tax treatment, and the need to eliminate arbitrage which results in the launch of similar products under the supervision of different regulators.We have also highlighted the tax arbitrage between mutual fund regimes and ULIPs in the past and the need to establish parity between both,” AMFI said.

“While the 2021 finance law has reduced this gap to some extent, it is requested to bring full parity, so that there are fair conditions of competition between players in the financial industry”, a- he added.

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