February 2, 2018

Why Chidambaram did away with LTCG in 2004

In 2004,Chidambaram did away with LTCG in his budget stating the following:

Capital gains tax is another vexed issue. When applied to capital market transactions, the issue becomes more complex. Questions have been raised about the definitions of long-term and short-term, and the differential tax treatment meted to the two kinds of gains. There are no easy answers, but I have decided to make a beginning by revamping taxes on securities transactions. Our founding fathers had wisely included entry 90 in the Union List in the Seventh Schedule of the Constitution of India. Taking a cue from that entry, I propose to abolish the tax on long-term capital gains from securities transactions altogether. Instead, I propose to levy a small tax on transactions in securities on stock exchanges

Note the word instead.It was both an implicit and explicit promise to the people of India.

Source: http://www.moneycontrol.com/budget2007/pre_budget/Union%20Budget%202004-05.pdf

Now,we have Arun Jaitley as the Finance Minister breaking this promise by bringing back the LTCG but not scrapping the STT !!

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