Government may announce roll back or tweak of 10% LTCG tax by March 31

By Sachin Dave , ET Bureau| Updated: Mar 21, 2017, 08.50 PM IST

MUMBAI: In what could give respite to some investors the government may be looking to roll back a budget announcement around long term capital gains (LTCG) tax, people in the know said. 

In the budget, the government had introduced a provision whereby anyone who acquired shares in unlisted companies before October 1, 2004, and had not paid securities transaction tax (STT) will be liable to pay 10% LTCG tax. 

Industry tracker says that the government had brought the provision to plug a loophole being used to evade taxes. Investigations by the income tax department and some other government agencies and earlier found that some of the listed companies were allotting back dated shares to investors to save on the tax. The budget proposal was aimed at curbing such deals, say experts. 

The government was looking to plug the loophole in thinly traded or group-z category shares. ET had on January 19 written that the government was looking to introduce LTCG tax on group-Z category of shares. Group-Z is a category made up of listed companies that have not complied with regulatory requirements. There are about 2,200 companies under the category on the BSE. 

Industry trackers say that not just private equity investors but even receipt of shares under gift, mergers, demergers, bonus issue, rights issue, acquisition of shares under IPO or shares of a company, which was listed after acquisition of shares, will be covered under the definition. 

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