Double Tax on Equity Investors?

 

Is India’s Stock Market Facing Double Taxation? Raghav Chadha Raises Concern in Parliament

New Delhi: During the debate on the Union Budget in the Rajya Sabha, Aam Aadmi Party MP Raghav Chadha raised concerns over what he described as “double taxation” on equity investors in India.

What Is the Issue?

Raghav Chadha pointed out that equity investors currently pay two different taxes on the same investment. One is the Securities Transaction Tax (STT), which is charged every time shares are bought or sold. The other is the Long-Term Capital Gains (LTCG) tax, which is levied on profits earned after holding shares for more than one year.

Why Is It Being Called Double Tax?

According to Chadha, STT was introduced at a time when long-term capital gains on equities were fully exempt from tax. The intent was to tax market transactions once and encourage long-term investment. However, when LTCG tax was reintroduced later, STT was not removed. As a result, investors now pay tax both at the time of trading and again on profits.

What Does This Mean for Retail Investors?

This structure directly affects small and retail investors who rely on long-term investments for wealth creation. Paying tax twice reduces effective returns and may discourage investors from staying invested in the stock market over the long term.

What Did Raghav Chadha Suggest?

While supporting the government’s move to increase STT on derivatives to curb excessive speculation, Chadha urged the Centre to abolish LTCG tax on equities for individual investors. He argued that long-term investing should be rewarded, not penalised.

Global Comparison

Chadha cited countries such as Singapore, Switzerland and the UAE, where long-term capital gains on equities are either minimal or not taxed at all. He suggested that India should consider similar policies to deepen its capital markets and encourage household participation.

Government’s Position

The Union Budget did not announce any changes to the LTCG tax structure. The government continues to view capital gains tax as an important source of revenue, and no specific response was given in Parliament to the concerns raised.

Why This Debate Matters

India has witnessed a sharp rise in retail investor participation in recent years. As more citizens turn to equity markets for financial security, tax policy plays a key role in shaping investor behaviour and confidence.

A Question for Policymakers

If long-term investment is essential for economic growth, should patient investors continue to face layered taxation?

The debate over double taxation in the stock market may shape the future of India’s investment ecosystem.