Long-term capital gains not to be axed | business | Hindustan Times
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Long-term capital gains not to be axed

business Updated: Aug 30, 2010 22:51 IST
HT Correspondent

Small investors have something to cheer about as the government seems to have given way to some of their concerns. Instead of its proposal to tax short-term capital gains arising from stocks and mutual funds at the marginal tax rate (the highest income tax slab of an individual), the DTC Bill proposes to tax short-term capital gains at half the marginal rate.

So, if your marginal tax rate is 30 per cent, you will pay a short-term capital gains tax at 15 per cent. As far as long-term capital gains tax goes, it has been kept out of the tax net, subject to the payment of securities transaction tax (STT).

The move benefits small investors. Individuals whose marginal tax rate is 20 per cent or 10 per cent will pay only 10 per cent and 5 per cent respectively, against the current reg-ime where they pay 15 per cent.

Investors in the highest tax bracket will pay 15 per cent as short-term capital gains tax, which is equivalent to the current tax of 15 per cent.

"Thus if an investor holds his shares for more than a year and has paid the STT (at the rate of 0.25 per cent, which exists today) on them, the entire amount of capital gains that he gets is not subject to tax," said Hemal Zobalia, executive director, KPMG. This comes as a booster to the stock markets where investors were apprehensive about their investments.