The Joint secretary
Tax Policy and Legislation Department
Central Board of Direct Taxes (CBDT)
Ministry of Finance
This is to bring to your kind attention that the taxation system in India discriminates in favor of investments in public markets rather than private investments. Long term capital gains (LTCG) in public markets (for securities held > 1 years) are taxed as 10% without indexation (without higher surcharge of 37% which is applicable to Individuals, association of persons and body of individuals) as compared to LTCG on unlisted shares with indexation (for shares held > 2 years) or unlisted securities without indexation (for securities held >3 years) which are taxed at 20% (with higher surcharge of 37%) in the context of resident investors. While indexation is available for sale of unlisted shares, it does not sufficiently compensate for the rate discrepancy that exists for listed and unlisted shares.
We recommend that one uniform average rate of LTCG tax to be applied for all securities / financial instruments based on the actual average rate of LTCG collected by the Government.
The detailed representation of the Uniform tax rate for taxation of all securities is attached for your perusal.