Finance Minister Nirmala Sitharaman on Saturday spoke to Republic Media Networks Editor-in-Chief Arnab Goswami after she presented the Union Budget for the year 2020-21 in the Parliament.
A big talking point all through the day, and especially during the speech, was how the markets would react, partially open as they were on Budget Saturday. With the benchmark BSE Sensex tanking during and after the speech, Sitharaman was asked about the reasons why, to which she said that Monday would provide a more accurate reflection.
Sitharaman said, "First of all, the stock market was not fully operational today, it was partly operational, so I want to give them that advantage. Let us see how they respond on Monday. I will give them the advantage until Monday."
In her Budget speech, Sitharaman had announced the abolition of dividend distribution tax (DDT), which was among the most expected moves, as per analysts. However, the Finance Minister chose to retain long-term capital gains (LTCG) tax on equity mutual funds in her second budget.
Speaking about criticism she's received about these moves as well as the Income Tax cut, Sitharaman said, "Personal income tax, not good enough. DDT, not good enough. LTCG, you didn't do it and therefore you are bad. DDT and LTCG, some people say are a form of double taxation, I removed DDT, but complete removal? What does one mean by complete removal? I am leaving it to an individual who has some income and at this applicable rate, this income is also getting taxed at the individual's hand rather than at the company's hand, why should it hurt the company?"
She added, "I have removed the burden on the company whereas the individual shareholder, the lower end fellows might benefit from it because they were paying 15% where now probably, they don't need to pay anything at all. Shareholders, if they are paying less than 15% as per their appropriate level, why shouldn't it be applicable?"
Returns on investments in equity mutual funds held over a year are treated as long-term capital gains and taxed at 10% on gains of over Rs 1 lakh in a financial year. The LTCG tax was re-introduced by Arun Jaitley, the then finance minister, in his budget speech on 2016. While re-introducing the LTCG tax, he also provided relief to existing equity investors in the form of grandfathering of returns. This clause exempted returns made before January 31, 2018.