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Allow LTCG relief on stocks held for 3 years, brokers urge FM

Stakeholders request finance ministry to withdraw dividend distribution tax

, ET Bureau|
Updated: Dec 15, 2018, 11.34 AM IST
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MUMBAI: Stock brokers have sought exemption of long-term capital gains tax (LTCG) on securities held for three years or more, withdrawal of dividend distribution tax (DDT), abolition of stamp duty on stock exchange transactions and a higher limit for investment under Section 54EC of the Income Tax Act.

The Association of National Exchanges Members of India and the Bombay Stock Exchange Brokers Forum listed these demands in a joint letter addressed to markets regulator Securities and Exchange Board of India, to be included in the regulator’s budget recommendations to the finance ministry.

The first demand is for rationalisation of the securities transaction tax (STT) on exercise of options with introduction of delivery-based derivatives contracts. At present, the STT on deliverybased settlement of futures contract is at the same rate applicable on delivery-based purchase or sale of equity shares. Brokers want removal of this additional tax.

Budget Wish List
Their main demand is for scrapping of LTCG on securities held for three years or more. The government in the last budget introduced an LTCG of 10% on all stocks sold after holding for a year. In India, the percentage of the total population investing in stock exchange-traded instruments is abysmally low and hence, there is a need to attract and incentivise investors for holding the investment for the long term, the brokers forum said.

On dividend distribution tax (DDT), the industry bodies said the levy, at 20% currently, resulted in triple taxation of corporate earnings. The tax on the dividend should be in the form of equalisation to balance the difference between corporate and personal tax, they said, and recommended the withdrawal of DTT and instead levy of a 10% tax on the recipient.

Other demands include reintroduction of the rebate under the erstwhile Section 88E for STT and CTT (commodities transaction tax) paid, reduction in the rate of STT, exemption of interest from levy of GST and abolition of stamp duty on stock exchange transactions.

In order to encourage savings, channelise it towards productive assets and give a fillip to the divestment targets of the government, they recommended that an additional ₹50 lakh limit be given under Section 54EC for investment in the ETFs comprising shares in central public-sector enterprises.

Since the Centre imposes STT, which is transaction based, the levy of stamp duty by states is not justified, they said.
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