Monday, 26 December 2016

PM wants Financial Markets to pay more tax: An Analysis.

 PM has given a statement regarding taxation on financial markets where stocks, shares, commodities are being traded now digitally. PM just gives statements and after that lakhs of crores of people start applying their mind and discussing with the related experts about the possible outcome of such statements. Now people think whenever PM gives any statement after sometime the related party agencies start implementing the same. 

So now people related with stocks and commodity exchanges, brokers, sub-brokers and traders along with short term & long term investors are all busy thinking & discussing the possible changes in related provisions. PM wants a fair share & tax burden should be taken by people relating to financial markets. 

This is fine but financial markets are all operating in digital mode including all trading operations, payments, receipts. So things here are transparent except Grey Market commonly known as Dabba Trade and everyone wants this Dabba Trade to be curbed. 

From whom PM wants more tax, the traders who are already paying CTT & STT (Securities Transaction Tax). The annual collection from STT is estimated to be 7000 crores. This is a handsome amount so whether STT would be further increased.

If we talk about investors, if they are blocking/investing their money in listed securities for more than 1 year then they are exempt from paying tax. Previously FIIs and NRIs used to pay tax at lower rates than domestic investors. Later the government made the taxation structure for domestic investors at a similar level with foreign investors. Whether again taxation for only domestic investors would be increased or for both domestic & foreign investors.

Presently the dividends from listed share companies are tax free. Whether dividend would be made taxable from financial markets. 

Few things are there like Tax Minimisation Strategy by Bonus Issue. 

People who know the law and sometimes play with it by buying penny shares of small cap shares at very low prices and they sell these shares at a very high price after holding these shares for more than 1 year. This way they accumulate heavy Capital Gain Deposit without paying any tax. So action is really needed against such people.

No one knows what is going there in the mind of law makers and what FM is going to present in the budget but one thing should be taken care that law should only punish the guilty and not the investors & traders who are fairly and transparently doing their business in financial markets.

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