Whether you are a retail investor or an institutional one, everyone anticipates getting good returns out of their investments. However, it is crucial to understand that tax laws are applicable to long-term capital gains. After all, it will determine the amount you will be churning out of your investments. The equity and debt market is full of wealth creation opportunities. Yet, one must assess the tax implications associated with each investment asset and class type. 

The government has started discussions in full swing to bring uniformity amongst the LTCG (long-term capital gains) tax on debt, listed and unlisted shares. It can be a sigh of relief for the investors who prefer to put their money into various financial assets. Eventually, it will draw homogeneity in the tax rates for the long-term capital gains.


A Glance at the Present Listed and Unlisted Shares Taxation 

The tax rates alongside the holding period are currently dissimilar for the debt, listed, and unlisted equities. Here are the pivotal diversities:

  • The returns arising out of listed shares are taxed at 10% upon being held for a minimum of one year and there is no benefit of indexation provided.
  • The unlisted shares taxation stands at 20% with the benefit of indexation if the holding period is at least two years.
  • The NRIs (Non-resident Indians) are taxed at 10% without indexation if the holding period of unlisted shares is more than two years.
  • The tax on long-term capital gains is 20% after indexation when the debt funds are retained for over three years.




The Big Question: Will there be a change in the tax rates of listed securities?

According to the industry trackers, the government might not alter the tax rates in the near future for listed shares. However, there is a need to rationalize the capital gains system amongst the debt-based financial instruments, listed and unlisted shares for the Indian and foreign investors. 
On another note, if the short-term or long-term capital gains on the listed shares are hiked, it can possibly influence the attractiveness for retail investors and FPIs (foreign portfolio investors). For a massive number of investors, the parity between listed and unlisted shares is not just on taxation but also on the holding period.
The government is set to make a noteworthy debut in the primary market with LIC's IPO (initial public offering). The government might not increase the LTCG for listed shares at this crucial stage. Instead, it will emphasize reducing the unlisted shares taxation on long-term capital gains. The government is also considering the tax rates for the debt. 
At present, the LTCG tax on debt/debt mutual funds is comparatively higher than the equity-based funds. Therefore, the government is looking forward to augmenting more evenness into versatile financial securities. 


How government’s intervention will be sanguine for the investors?

  • If the government comes into play, it will inculcate a sense of reliability in the market.
  • The investors will be able to build trust over financial assets through the government’s involvement in the primary market.
  • Eventually, the tax parity would draw retail investors into the stock market, particularly in the unlisted space.


Democratizing the Participation of Retail Investors in Unlisted Space

Undeniably, the unlisted market is well-equipped with the best investment opportunities. Hence, the chipping in of retail investors is crucial. Despite this, the majority of them are unaware of the stock market or have little experience with it. 

Investopia is one such platform that aims to democratize the participation of retail investors in the unlisted space. It eases your investment journey, makes it hassle-free, and provides significant financial insights to help retail investors make a prudent choice. 


The Final Thoughts

The senior tax officials are presently assessing the feasibility and implications of bringing parity in debt-based, listed and unlisted shares taxation. Besides, the impact of anticipated tax uniformity on the government revenue is also being considered. The most crucial factor to look forward to would be how the government would roll out this significant change. If implemented, this initiative by the government will boost the partaking of retail investors in the unlisted space. 

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