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SBI Research Estimates Rs 40,000-50,000 Crore Revenue Loss from LTCG Tax Scrapping
Sentiment: NeutralHigh Priority
What Happened?
SBI Research suggests that scrapping the long-term capital gains (LTCG) tax may result in a revenue loss of Rs 40,000-50,000 crore, manageable for the government. This is significantly lower than the Rs 1.3 lakh crore collected in FY25.
Key points
- The potential revenue loss from scrapping LTCG tax is estimated at Rs 40,000-50,000 crore.
- This loss represents about 0.1%-0.2% of India's GDP.
- SBI Research warns against using FY25 capital gains figures to estimate future losses.
- Foreign institutional investor outflows have reached Rs 4.8 lakh crore, impacting the equity market.
- SBI proposes increasing the LTCG tax exemption limit from Rs 1.25 lakh to Rs 2 lakh.
- The report suggests raising securities transaction tax (STT) to offset potential revenue losses.
Key insights
- The government may manage the revenue loss without significant fiscal strain.
- Increased STT could lead to higher transaction-based tax collections.
- Changes in LTCG tax could attract more retail investors to the equity market.
Why it matters
The proposed changes to LTCG tax could influence investment behavior and government revenue.
Source
Times Now
