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Jaitley clarifies on 'erroneous interpretation' of Modi favouring higher taxes on capital gains

Finance Minister Arun Jaitley on Sunday clarified that Prime Minister Narendra Modi’s speech in which he stated that tax collection from capital market participants is low, owing illegal activities and fraud has been largely misinterpreted.

Ahead of the Budget, Prime Minister Narendra Modi on Saturday favoured increasing the tax contribution from various market participants in a “fair, efficient and transparent way” and promised more “sound and prudent policies and reform measures”. Asking the regulators and taxmen to think about the contribution of market participants to the exchequer, Modi said, “The low contribution of taxes may be due to the structure of our tax laws. Low or zero tax rate is given to certain types of financial income.”

“We should consider methods for increasing it in a fair, efficient and transparent way,” added the Prime Minister, while inaugurating the new educational and training campus of the Sebi-run National Institute of Securities Markets in this industrial township near Mumbai.

The market interpreted the Prime Minister’s remark as a signal that the Centre may introduce long-term capital gains tax in the coming budget. Presently, gains from the capital gains tax are exempt for a stock traded on an exchange and held for over a year. While, if a trader books profit in a stock held for less than a year, a capital gains tax of 15% is imposed.

Commenting on this, the Finance Minister stated, “The speech has been misinterpreted as an indirect reference that there could be a long term capital gains on security transactions. This interpretation is erroneous. He (Modi) has made no such statements directly or indirectly. There is no occasion or opportunity for anybody to reach such a conclusion.”

He further clarified that the speech was made with regard to all sections including market players contributing to the national exchequer.

(With PTI inputs)