The Prime Minister’s Office is reviewing existing structure of Long Term Capital Gains (LTCG) tax, the Securities Transaction Tax (STT) and Dividend Distribution Tax (DDT), sources said.
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In a move that could boost investor sentiment and bring in foreign exchange into the government’s coffers, Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman are planning a series of tax alignments for equities in the coming weeks, sources in the Finance Ministry and NITI Aayog have said.
The Prime Minister’s Office is reviewing existing structure of Long Term Capital Gains (LTCG) tax, the Securities Transaction Tax (STT) and Dividend Distribution Tax (DDT) in consultation with the Finance Ministry’s Revenue Department and NITI Aayog, a source told CNBC Awaaz.
Another added that the steps were likely to be announced before or in the Budget. Sitharaman is likely to present the Annual Budget for FY-21 on February 3. “Now a group of officials are preparing the groundwork which is likely to finalised by November-end,” the source added.
In the past three months, Sitharaman has taken a series of bold steps to kick-start growth in Asia’s second-largest economy, which is witnessing a slowdown. The Finance Minister has slashed corporate tax rates to 15 per cent for new units from 30 per cent earlier; aggressively mounted a campaign to sell loss-making public sector companies; forced government departments to start spending budgeted allocations; pushed for quicker payments to outstanding government bills; nudged public sector banks to lend aggressively to small and medium sized enterprises and has also merged 12 public sector lenders to create four large banks in a bid to stem non-performing assets, give greater autonomy to government lenders and make them locally competitive to their private peers.
The Indian corporate tax structure is thus the lowest in southeast Asia now. Foreign investor inflows have improved sharply and major indices are less than three per cent away from record highs.
Sources added that comparative studies were being done for longer term money from sovereign wealth funds, pension funds and insurance monies to flow into local equities.
Initial discussions point to DDT being brought down substantially as several decision makers believe it is a major impediment in bringing in long-term overseas pension money into Indian equities.
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