In a significant boost to the government’s revenue, the Ministry of Finance has announced that it has collected Rs 98,681 crore from long term capital gains (LTCG) tax on listed equities in the financial year 2022-23. This represents a 15% increase from the previous year.
According to Minister of State for Finance Pankaj Chaudhary, the government has seen a steady growth in collections from LTCG tax over the past few years. In a statement, Chaudhary revealed that the government has collected Rs 98,681 crore from LTCG tax on listed equities in FY23, up from Rs 85,784 crore in FY22.
A Steady Growth in Collections
The government’s collections from long term capital gains (LTCG) tax on listed equities have shown a steady growth over the past few years. According to the data shared by Minister of State for Finance Pankaj Chaudhary, the government collected Rs 98,681 crore from LTCG tax on listed equities in 2022-23, up 15% from Rs 86,075 crore in 2021-22.
The collection of LTCG tax has been increasing steadily since its introduction in 2018. In 2018-19, the government collected Rs 29,220 crore, which increased to Rs 26,008 crore in 2019-20 and Rs 38,589 crore in 2020-21.
The growth in collections from LTCG tax is a reflection of the growing trend of investments in the stock market. With the Indian economy growing at a steady pace, more and more people are investing in the stock market, leading to an increase in LTCG tax collections. The steady growth in collections from LTCG tax is a positive sign for the government, which is looking to increase its revenue collections to fund its various welfare schemes and infrastructure projects.
A Significant Boost to Revenue
The collection of Rs 98,681 crore from long term capital gains (LTCG) tax on listed equities in FY23 is a significant boost to the government’s revenue. This represents a 15% increase from the previous year, and is a reflection of the growing trend of investments in the stock market.
The government’s revenue from LTCG tax has been steadily increasing over the past few years. In FY19, the government collected Rs 29,220 crore, which increased to Rs 26,008 crore in FY20, Rs 38,589 crore in FY21, and Rs 86,075 crore in FY22.
The steady growth in collections from LTCG tax is a positive sign for the government, which is looking to increase its revenue collections to fund its various welfare schemes and infrastructure projects. The government’s decision to hike the LTCG tax rate on equities and equity-oriented mutual funds to 12.5% from 10% in the Budget for 2024-25 is also expected to further boost revenue collections.
It’s worth noting that the LTCG tax is a key source of revenue for the government, and the growth in collections from this tax is a reflection of the growing economy and the increasing trend of investments in the stock market.
A Growing Trend
This growth in collections from LTCG tax is a positive sign for the government, which is looking to increase its revenue collections to fund its various welfare schemes and infrastructure projects. The government’s decision to hike the LTCG tax rate on equities and equity-oriented mutual funds to 12.5% from 10% is also expected to further boost revenue collections.
The widening gap between short-term capital gains (STCG) and LTCG rates is a clear incentive for longer-term holdings, which aligns with the view of creating sustainable wealth. The increase in LTCG tax rate will nudge investors towards longer-term holdings and discourage speculative activity.
The rationalisation of capital gains tax regime has also ushered parity in taxation across asset classes. The holding period for REITs is now reduced to 12 months, from 36 months, to qualify as long-term asset, on a par with equities. Similarly, the holding period for LTCG in real estate, gold and international funds is now the same for all at two years.
The Budget has extended some relief by increasing the tax exemption on LTCG from Rs 1 lakh to Rs 1.25 lakh in a financial year. Despite the hike in LTCG tax rate, the wider gap relative to STCG tax rate and higher exemption makes longer-term holdings more attractive for investors.
Conclusion
The collection of Rs 98,681 crore from LTCG tax on listed equities in FY23 is a significant achievement for the government. This will help the government to meet its revenue targets and fund its various schemes and projects. With the Indian economy expected to continue growing, the collections from LTCG tax are likely to increase in the coming years. To a question on whether the government is contemplating to abolish the LTCG tax on equities/mutual funds during 2024-25, Chaudhary said, “There is no such proposal”. The Budget for 2024-25, announced on July 23, hiked LTCG tax on equities and equity oriented mutual funds to 12.5 per cent, from 10 per cent. The exemption threshold was also hiked to Rs 1.25 lakh, from Rs 1 lakh previously.
FAQ’s
- Q: How much did the government collect from long term capital gains tax on listed equities in FY23? A: The government collected Rs 98,681 crore from long term capital gains tax on listed equities in FY23, a 15% growth over the previous year.
- Q: What is the tax rate on long term capital gains on equities and equity-oriented mutual funds? A: The tax rate on long term capital gains on equities and equity-oriented mutual funds is 12.5%, up from 10% previously.
- Q: What is the exemption threshold for long term capital gains tax? A: The exemption threshold for long term capital gains tax is Rs 1.25 lakh, up from Rs 1 lakh previously.
- Q: Is the government planning to abolish the long term capital gains tax on equities/mutual funds? A: No, there is no such proposal to abolish the long term capital gains tax on equities/mutual funds.
- Q: How do I report and pay the long term capital gains tax? A: Only individuals owing capital gains tax are required to file a capital gains tax return, along with a copy of their federal tax return for the same taxable year.
