Union Budget 2018: Sensex falls for third day, as govt unveils equities tax

The announcement of capital gains tax on long-term equity investments weighed on the markets,as Indian shares ended lower for third consecutive day

Indian shares ended lower for a third straight session on Thursday, after the government’s 2018/19 budget set a capital gains tax on long-term equity investments, although investors welcomed higher spending in key areas of the economy such as agriculture.

A man looks at a screen across a road displaying the Sensex at the Bombay Stock Exchange (BSE) building. The government imposed a 10 per cent tax on long-term capital gains made in the share market in the current budget. (Reuters)

The announcement sent the stock market in a tizzy. The broader NSE index ended 0.1 percent down to 11,016.90 in a volatile session where shares briefly plunged 1.35 percent and gained up to 0.81 percent.

The benchmark BSE index closed 0.16 percent lower at 35,906.66.

“I propose to tax such long-term capital gains exceeding Rs 1 lakh at the rate of 10 per cent without allowing the benefit of any indexation. However, all gains up to January 31, 2018, will be grandfathered,” Jaitley said while unveiling the 2018-19 budget.

The budget proposal would result in a revenue gain of Rs 20,000 crore in the first year, he said, adding that the realisation in the subsequent years could be more.

With the Budget proposal, now long-term capital gains exceeding Rs 1 lakh will be subject to 10 per cent tax.

Tightening of the long-term capital gains provision under the Income Tax Act is an extension of the government’s fight against black money, experts said.