Jaitley slaps 10% long-term capital gains tax on equities

Also, 10 per cent tax has been levied on distributed income by equity oriented mutual funds.

The Budget announcement by Finance Minister Arun Jaitley sent stock markets into a tizzy, with BSE Sensex plunging over 400 points in the noon trade. Markets, however, recovered later in the day and closed with modest losses.

"I propose to tax such long-term capital gains exceeding Rs 1 lakh at the rate of 10 per cent without allowing the benefit of any indexation. However, all gains up to January 31, 2018, will be grandfathered," Jaitley said while unveiling the 2018-19 budget.

The budget proposal would result in a revenue gain of Rs 20,000 crore in the first year, he said, adding that the realisation in the subsequent years could be more.

Currently, 15 per cent tax is levied on capital gains made on sale of shares within a year of purchase. However, long-term capital gains tax is nil for shares sold after a year of purchase.

With the Budget proposal, now long-term capital gains exceeding Rs 1 lakh will be subject to 10 per cent tax.

Tightening of the long-term capital gains provision under the Income Tax Act is an extension of the government's fight against black money, experts said.

The government had in 2016 amended bilateral tax treaties with countries like Mauritius, Cyprus and Singapore allowing Indian authorities to tax capital gains arising out of India.

Prime Minister Narendra Modi had in December 2016 said stock market participants should contribute more to the exchequer by way of taxes.