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Government may lower long-term capital gain tax on investment to startups

New Delhi(PTI): Government on Saturday hinted at lowering the long-term capital gain tax on investments made in unlisted firms, particularly startups, in the Budget for the next financial year, to bring them closer to the levels prevalent for the listed companies.

Speaking at Start Up India conference, Revenue Secretary Hasmukh Adhia said a long-term capital gain tax of 20% is levied on a three-year investment in an unlisted company, but holding of equity shares of a listed firm for one year is exempt from any such levy.

“Now this gap is too wide… I can assure you of this gap being bridged at the time of Budget,” he said.

Adhia said some other tax incentives to encourage startup ecosystem, like rationalising Service Tax rules, are also likely to be announced in Budget, to be presented on February 29.

Also read: Full text of Finance Minister Arun Jaitley’s speech at Start-Up India initiative launch

A strong pitch for removing the differential treatment of taxing long-term gains in listed and unlisted companies have been made, he said.

“The point is, if somebody is making hot investment in equity market, if he keeps it for one year, after one year there is zero capital gain. As compared to that people who have been taking the risk of putting long-term equity investment in unlisted security, like in case of a startup, they have to pay 20% even after 3 years,” Adhia said.

Speaking at the same event, Economic Affairs Secretary Shaktikanta Das said the Finance Ministry has held detailed discussion with the Reserve Bank over online filing of returns under FEMA.

“You will see very quick action on that which will facilitate online filing of returns,” Das said.

He said interest rates in India will be comparable to those prevalent in countries like the US and Japan when inflation rate falls to their levels on a consistent basis.

Sebi Member Prashant Saran said the markets regulator has been been “very proactive” to encourage startups. He said startups were welcome to approach the regulator with suggestions adding “none of our regulations are written down on stone.”

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