{"id":17039,"date":"2020-09-29T14:21:45","date_gmt":"2020-09-29T08:51:45","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=17039"},"modified":"2020-09-29T14:25:16","modified_gmt":"2020-09-29T08:55:16","slug":"abolishing-of-tax-on-long-term-capital-gains","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/abolishing-of-tax-on-long-term-capital-gains\/","title":{"rendered":"Abolishing of tax on Long Term Capital Gains"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The Standing Committee on Finance recommended\nthe Central Government to abolish the tax on Long Term Capital Gains for investments\nin startups companies that can be done by collective investment like Alternate\nInvestment Funds, angel funds and investment LLP.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/abolishing-of-tax-on-long-term-capital-gains\/#Report_by_the_Standing_Committee_on_Finance\" >Report by the Standing Committee on Finance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/abolishing-of-tax-on-long-term-capital-gains\/#Reason_for_Abolishing_Tax\" >Reason for Abolishing Tax<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/abolishing-of-tax-on-long-term-capital-gains\/#Steps_taken_by_the_Committee\" >Steps taken by the Committee<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/abolishing-of-tax-on-long-term-capital-gains\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Report_by_the_Standing_Committee_on_Finance\"><\/span>Report by the Standing Committee on Finance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Report by the Standing Committee on Finance titled as <strong><em>&#8220;Financing the startup ecosystem&#8221;<\/em><\/strong> submitted to the Lok Sabha Speaker stating that the committee on finance has strongly suggested that the tax on Long Term Capital Gains to be eliminated for all investments in startup companies that are made through collective investment like <a href=\"https:\/\/corpbiz.io\/alternative-investment-fund-registration\"><strong>Alternate Investment Funds<\/strong><\/a>, angel funds and investment LLP. To encourage investment during this pandemic period, the tax should be abolished for at least next 2 years.<\/p>\n\n\n\n<p>The recommendation of the report says that,\n&#8220;After this 2 year period, the Securities Transaction Tax can be applied\nto Collective Investment Vehicles so that neutrality of revenue is maintained.\nInvestments by Collective Investment Vehicles are done transparently and at\nfair market value. Thus it is easy to calculate the Securities Transaction Tax\nrelated with the investments. This can be done instead of imposing Long Term\nCapital Gains on these Collective Investment Vehicles and to make the taxation\nsystem less burdensome, fair and transparent. This can also make certain that\ninvestments in unlisted securities are on par with investments in listed\nsecurities.&#8221;<\/p>\n\n\n\n<p>The report also called to institute a level for smooth functioning for domestic investments in relation to foreign investments and domestic listed securities with reference to unlisted securities. At present, Long Term Capital Gains earned by foreign investors in private companies draws taxation at concessional rate of 10%. Whereas, the domestic Venture Capital\/Private Equity investments are being taxed at 20% for LTCG with surcharge of 37%.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/supreme-court-recommends-comprehensive-system-of-advance-tax-ruling-to-reduce-litigation\/\">Supreme Court Recommends Comprehensive System of Advance Tax Ruling to Reduce Litigation<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Reason_for_Abolishing_Tax\"><\/span>Reason for Abolishing Tax<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Given that the Indian economy is stumbling under the post COVID \u2013 19 pandemic and a variety of sectors needs capital to recover. The Committee suggested that the exclusion of income on investments made before 31 March, 2024, subject to the investment being held for a period of at least 36 months as an incentive in <strong><em>The Finance Act<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Finance_Act_(India)\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>, 2020, shall provide long-term and patient capital investment across all the sectors.<\/p>\n\n\n\n<p>The Committee also suggested that in line\nwith the universal practice, large number of financial institutions in India\nshould be encouraged to project a fraction of their surplus funds into domestic\nfunds which can bring in much required additional domestic capital for start-up\ninvestments. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Steps_taken_by_the_Committee\"><\/span>Steps taken by the Committee<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The steps taken by the committee includes the following details:-<\/strong><\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"591\" height=\"352\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-113.png\" alt=\"Steps taken by the Committee\" class=\"wp-image-17040\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-113.png 591w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-113-300x179.png 300w\" sizes=\"(max-width: 591px) 100vw, 591px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Encouraging PFRDA &amp; NPS<\/h3>\n\n\n\n<p>Pension Fund Regulatory and Development\nAuthority and National Pension Scheme are encouraged to invite bids from\nprofessional fund managers for running a fund-of-funds program on which SIDBI\nwill also be eligible to participate.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Major Banks should Join Hands<\/h3>\n\n\n\n<p>Major Banks should join hands to float a\nfund-of-funds. Moreover, the current exposure limits applied in the banks need\nto be improved and authorization should be granted to invest in Category III Alternate\nInvestment Funds.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Investment by IRDAI<\/h3>\n\n\n\n<p>Insurance companies should be given\nautonomy to invest in fund-of-funds by IRDAI as well as directly in Venture Capital\/Private\nEquity funds along with a high exposure to VC\/PE. The investments made by\ninsurance companies in Alternate Investment Funds should be created under a\nseparate category while calculating the exposure limits and not associated with\nother investments under &#8216;unapproved investments&#8217;.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Encouraging Foreign Development Finance Institution<\/h3>\n\n\n\n<p>Foreign Development Finance Institutions should\nbe encouraged to participate with local asset management companies to set up\nfund-of-funds structure or direct Venture Capital\/Private Equity funds, mostly\nin healthcare, social impact and venture or start-up sectors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Standing Committee on Finance noted that successful Initial Public Offerings of Real Estate Investment Trusts and Infrastructure Investment Trust have already shown that asset selection can be packaged together to attract precise investor type and thus will like to recommend that <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFCs<\/strong><\/a> can also be allowed to list on stock exchange to be able to attract a larger investment pool. So for investment in start-up companies the committee recommended the Central Government should abolish the tax on Long Term Capital Gains.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/major-reforms-aimed-at-transparent-taxation-for-honoring-the-honest-pm-modi-launched\/\">Major reforms aimed at Transparent Taxation for \u2018Honoring the Honest\u2019 \u2013 PM Modi launched.<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Standing Committee on Finance recommended the Central Government to abolish the tax on Long Term Capital Gains for investments in startups companies that can be done by collective investment like Alternate Investment Funds, angel funds and investment LLP. Report by the Standing Committee on Finance Report by the Standing Committee on Finance titled as [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":17071,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[152],"tags":[1047],"acf":{"service_id":"50"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":2699,"readingTime":3,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/17039"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=17039"}],"version-history":[{"count":5,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/17039\/revisions"}],"predecessor-version":[{"id":17073,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/17039\/revisions\/17073"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/17071"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=17039"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=17039"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=17039"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}