Goa: The Taxation Laws (Amendment) Ordinance of 2019 promulgated on Friday rolled back the increase in surcharge on capital gains made by investors from the sale of listed shares, in a move aimed at lifting the sentiment and boosting capital market investments.
According to experts, with Friday’s announcement, the surcharge increase, often referred to as the ‘super rich tax’, was rolled back for all domestic and foreign investors as far as income from listed equity shares was concerned. However, for income from salary, profession or rent above ₹2 crore, the surcharge increase will continue.
The Finance Act (2) of 2019 had raised the surcharge on income tax from 15% to 25% for incomes in the range of ₹2-5 crore, and from 15% to 37% for those earning more. In effect, a person earning in the range of ₹2-5 crore was to pay 39% tax (referred to as the highest marginal tax rate for that person) on incomes exceeding ₹2 crore, and a person earning more than ₹5 crore was to pay 42.74% on incomes exceeding ₹5 crore. The amendment to the Income Tax Act announced on Friday is effective from 2019-20.
An official statement issued after finance minister Nirmala Sitharaman made the announcement said the move was aimed at stabilising “the flow of funds into the capital market." The statement said the surcharge increase announced in the budget doe not apply on capital gains arising from the sale of listed equity shares in the hands of individuals, Hindu Undivided Families, associations of persons, body of individuals and artificial juridical persons. The relief is also applicable to gains made on the sale of units of equity oriented funds and business trusts on which Securities Transaction Tax has been paid.
Investors welcomed the move with a historic rally in the stock markets, with the Sensex gaining the most in 10 years.