Indian Busineses to See Capital Gains Tax Exemption

July 21, 2011 Taxation in India

Busineses to See Capital Gains Tax ExemptionSmall and medium enterprises in India could soon see greater access to investment funds, as the government looks into new policies to exempt capital gains from tax liabilities.

In a statement issued on July 20th in New Delhi, the Secretary of the Department of Industrial Policy and Promotion (DIPP) Rajinder Pal Singh revealed that the Revenue Department of the Finance Ministry of India has given initial support for a newly proposed policy to grant exemptions from capital gains tax liabilities for small and medium enterprises.

According to the Secretary, the policy would be expanded to also allow individuals to sell off personal assets and be exempt from capital gains tax on the sale, as long as the proceeds were being used as an investment into a small enterprise operating in India. It is believed that the proposed policy would spur greater numbers of national taxpayers to start their own businesses. If the proven to be effective, the new policy will have a significant positive effect on the economy, and would also boost employment levels. Rajinder Pal Singh added that if the proposal is passed, it would greatly reduce the “intrusion” of government departments and tax authorities into the affairs of businesses.

The exact details of the tax are yet to be finalized and confirmed, with the Revenue Department and DIPP needing to complete projections of the proposal’s effect on India’s tax revenues. Once the departments complete the estimates, the proposal will be moved further up the process towards official government approval.

Currently India’s tax rate on long term capital gains is 20 percent, and the profits from short term capital gains are added to the seller’s personal income.

Photo by charlie llewellin