Budget 2019 expectations: Companies demand waiver from triple taxation for ETF investors - Will Modi-Jaitley waive it off?
The Long-Term Capital Gain (LTCG), Security Transaction Tax (STT) Dividend Distribution Tax (DDT) result in triple taxation of corporate earnings.
Budget 2019 demands: In a bid to ensure the safety of the small number of investors in exchange-traded instruments, market experts have demanded from the PM Narendra Modi led Central government to waive-off triple taxation through Long-Term Capital Gain (LTCG), Security Transaction Tax (STT) and Dividend Distribution Tax (DDT). They said the move would not only help attract more investors into the exchange-traded funds (ETF) but safeguard triple taxation of the Indian corporates too.
Pressing for a pragmatic approach in the coming Budget, Rachit Chawla, Founder & CEO Finway told Zee Business online, "India already has a low percentage of investors who deal in stock exchange-traded instruments. Thus, there is a need to pull these investors, which isn’t possible if LTCGs exist. Dividend distribution tax (DDT) is another concern. Currently, there is no DDT for foreign shareholders, but certain tax residents of India such as Hindu Undivided Families and firms or even individuals with dividend income aggregating to Rs 10 lakh or more, are bound to pay tax at 10 per cent plus applicable surcharge and cess. This significantly affects individuals and retail investors. Hopefully, the government will either lower it or completely repeal it in the 2019 budget."
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Standing in sync with the views expressed by Finway; Dr. Arun Singh, Lead Economist at Dun and Bradstreet told in a written statement, "The Long-Term Capital Gain (LTCG), Security Transaction Tax (STT) Dividend Distribution Tax (DDT) result in triple taxation of corporate earnings that are distributed. This has led companies to favour debt capital over equity capital. Given the high NPA levels, the Union Budget 2019-20 is likely to announce measures towards the rationalisation of these taxes so that corporates can move towards equity capital."
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