“Revenue Secretary Defends Small Hike in LTCG Tax as Justified”

Revenue Secretary Sanjay Malhotra explains the slight increase in long-term capital gains (LTCG) tax on listed stocks. He says the new rate of 12.5%, up from 10%, is still low compared to higher taxes on salary, business, and rental income. This change mainly affects high-income individuals.

Malhotra also defends removing the inflation adjustment (indexation) for real estate LTCG. While indexation lowers taxable gains by accounting for inflation, other investments like shares and fixed deposits don’t have this benefit. Removing indexation makes the tax system simpler and fairer.

The 2024-25 Union Budget set a 12.5% LTCG tax on all assets. This increased the tax rate on stocks by 2.5% and lowered the rate on real estate by 7.5%, but without indexation. Malhotra believes this minor change has been accepted by the markets and there’s no need to reconsider it. He argues that the tax changes are fair and justified.