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Market is down because of global trend, don't link it to LTCG tax: Hasmukh Adhia

Market is down because of global trend, don't link it to LTCG tax: Hasmukh Adhia

The Finance Secretary today said that if the entire world index has gone down by 3.4 per cent, naturally it would have ripple effect on Indian stock market also.

Finance Secretary Hasmukh Adhia said today that the selloff in equity markets is due to weak global sentiment and not because of long-term capital gains tax announced in the budget. Ever since Finance Minister Arun Jaitley announced 10 per cent tax on Long Term Capital Gains or LTCG, the market has come down by over 1400 points. Investors cited tax on LTCG behind this sudden crash.

However, Adhia said if the entire world index has gone down by 3.4 per cent, naturally it would have ripple effect on Indian stock market also. It is not LTCG tax effect, he said, adding that the 10 per cent tax on LTCG is a subsidised rate as such gains on sale of unlisted scrips and immovable property are taxed at 20 per cent.

"It is very unfortunate that our move came in at wrong time because of global markets also going down. There is a strong connection of all equity markets. The MSCI all country index of equity markets went down by 3.4 per cent in last week, especially on Thursday, Friday," Adhia said this in a post-budget meet organised by industry body CII.

In his last full budget for current tenure, the Finance Minister imposed a 10 per cent tax on LTCG of over Rs 1 lakh made on sale of shares from April 1. However, all gains made up to January 31, 2018, have been grandfathered - meaning no tax will be imposed till that date.


Adhia said that the LTCG effect should, in fact, not be there as the government has grandfathered it. "Why should anybody do a distressed sell now, because we have grandfathered, there is no hurry to sell. There is nothing that you are going to lose by selling it immediately. So it's not the effect of LTCG tax, it is the overall index of the equity market which has changed in other countries of world," he said.

Currently India imposes a 15 per cent tax on short-term capital gains made of sale of shares within a year of purchase. However, gains made after a year of purchase is exempt from the levy. The Budget 2018-19 has reintroduced the provision of taxing long term capital gains after a gap of 14 years.

(With inputs from PTI)