New Delhi: Defending his budget proposal to increase short term capital gains tax rate, Finance Minister P Chidambaram today said it would encourage the investors to hold on to their investments for a longer period in the markets, which are currently volatile.
"The idea is because of volatility in the market, we must encourage investors to stay invested for longer term, and I am doing precisely that by raising short term capital gains tax from 10 to 15 per cent," Chidambaram said during his post-Budget interaction with industry chamber Assocham.
In this context, the Finance Minister recalled legendary investor Warren Buffett's advice to investors: Correct approach to the stock market is put your money in the stock market and then say stock market is closed for 10 years. And look for returns after ten years.
He said by raising the short term capital gains tax, he is also equating the levy to dividend distribution tax of 15 per cent.
"From shareholders point of view if we hold a share and receive a dividend, that dividend is subject to 15 per cent dividend distribution tax. When he sells a share and makes profit or capital gain, why should he not be subject to the same tax as 15 per cent," he asked.
He said short term capital gains and long term capital gains are not distinguished in many jurisdictions and even capital gains and income are not differentiated in many countries.
But in India, these distinctions are there historically, Chidambaram said adding the Budget has not done away with these distinctions.
"The idea is because of volatility in the market, we must encourage investors to stay invested for longer term, and I am doing precisely that by raising short term capital gains tax from 10 to 15 per cent," Chidambaram said during his post-Budget interaction with industry chamber Assocham.
In this context, the Finance Minister recalled legendary investor Warren Buffett's advice to investors: Correct approach to the stock market is put your money in the stock market and then say stock market is closed for 10 years. And look for returns after ten years.
He said by raising the short term capital gains tax, he is also equating the levy to dividend distribution tax of 15 per cent.
"From shareholders point of view if we hold a share and receive a dividend, that dividend is subject to 15 per cent dividend distribution tax. When he sells a share and makes profit or capital gain, why should he not be subject to the same tax as 15 per cent," he asked.
He said short term capital gains and long term capital gains are not distinguished in many jurisdictions and even capital gains and income are not differentiated in many countries.
But in India, these distinctions are there historically, Chidambaram said adding the Budget has not done away with these distinctions.
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