Is CEA Dr. Nageswaran hinting at no urgency to tweak capital gains taxes on stocks? What has he said on the topic of capital market taxation

Chief Economic Adviser Dr. V. Anantha ‌Nageswaran on Friday said that the case for changes to capital gains taxes on equities is weaker ​than for bonds, according a Reuters report. 

The Reuters report added that the CEA gave statement suggesting that the government sees less urgency for further tweaks to the tax regime for stocks.

The important statement from CEA Dr. Nageswaran comes a week after the PM Modi-led government scrapped long-term capital gains tax on investments made by foreign institutional investors (FIIs) in government securities through an Ordinance issued.

The exemption applies to foreign institutional investors (FIIs) and the Bank for International Settlements (BIS), subject to prescribed information-reporting requirements.

The Ordinance brought changes in the Income Tax Act to provide the exemption.

In a bid to attract dollar inflow,  the government decided to remove the capital gains tax on G-secs to attract long-term, patient capital because these instruments have a longer tenure.

Foreign investors are subject to a long-term capital gains tax of 12.5 per cent on listed shares and bonds held for more than 12 months. They also pay a withholding tax of 20 per cent on interest earned ‌on government bonds.

The government promulgated an ordinance to amend the Income Tax Act to provide tax exemptions on interest income and capital gains arising from sale, exchange or transfer of government securities, effective from April 1, according to a gazette notification dated June 5.