Budget 2021: Investors breathe a sigh of relief as FM skips LTCG and STT rise

MUMBAI: Investors were relieved as Finance Minister Nirmala Sitharaman avoided an increase in long-term capital gains tax on equity investments and securities transaction tax in the government’s budget Union for 2021-22 announced today.

As the budget approached, most investors feared that the government might consider raising the long-term capital gains tax or securities transaction tax in order to boost its revenue, especially since the stock market has experienced a dizzying recovery since the beginning of April. .

In her July 2019 budget speech, the finance minister had reintroduced the long-term capital gains tax after 15 years. Currently, individuals who realize capital gains of more than Rs 1 lakh on their equity investment after a holding period of more than one year have to pay a 10% capital gains tax.

However, capital gains tax for individuals in the highest income bracket is around 15% including tax.

Fund managers had said the government needed to come up with an equity-friendly budget, involving no changes in stock market-related taxes, to ensure its divestment plans go smoothly over the next fiscal year.

Many feared that a long-term capital gains tax hike could hurt investor sentiment in a way reminiscent of the post-reintroduction sell-off in July 2019.

The 30-pack of Sensex shares advanced 2,314.84 points or 5.00% to end at 48,600.61. Its broader counterpart, NSE Nifty, climbed 645.60 points or 4.74% to end at 14,281.20.

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