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Budget 2022 Caps Long-Term Capital Gains; Reduces Tax Burden For Startups, Investors

Budget 2022 Caps Long-Term Capital Gains; Reduces Tax Burden For Startups, Investors

FM proposes to cap the surcharge on long term capital gains arising on the transfer of any type of assets at 15%

It will provide a level playing field for startups by capping LTCG to 15%, said Gopal Jain, managing partner, Gaja Capital

Currently, unlisted securities are taxed at 2.5 times the rate that listed securities are and Indian investors are taxed at twice the rate as non-Indian investors

Barring the ESOPs tax relaxation demand, finance minister Nirmala Sitharaman has addressed some of the key issues highlighted by Inc42 earlier: 5 Pivotal Things Indian Startups Expect From Union Budget 2022.

One of the key issues earmarked by the startup community was tax disparity on capital gains when it comes to listed shares vs unlisted shares. Siddarth Pai, founding partner of 3one4 Capital had earlier stated that unlisted securities are taxed at 2.5 times the rate that listed securities are and Indian investors are taxed at twice the rate as non-Indian investors.

Taking a cue from that the finance minister has now proposed to cap the surcharge on long term capital gains arising on the transfer of any type of assets at 15%.

Speaking on the Budget 2022, Sitharaman said that the long-term capital gains (LTCG) on listed equity shares, units etc are liable to a maximum surcharge of 15%, while the other LTCGs are subjected to a graded surcharge which goes up to 37%. I propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15%. 

This step will give a boost to the startup community and along with the abovementioned proposal on extending tax benefits to manufacturing companies and startups reaffirms our commitment to Atma Nirbhar Bharat, Sitharaman added.

The Budget Provides Level Playing Field

The budget has overall triggered a positive vibe among the startup community. Gopal Jain, cofounder and managing partner, Gaja Capital said that This will be remembered as a budget for startups and entrepreneurs. The FM has spent the last year preparing for this budget through prudent fiscal management. This has helped the nation manage inflation and push for infra spending next year. What stands out for me are a number of strokes of pen reform moves.

On the LTCG taxation revision, Jain said that the budget provides a level playing field for startups by capping LTCG surcharge to 15%. it aims to expand funding for startups by sponsoring more fund of funds. This path-breaking move will help onshore our offshore PE/VC industry and provide a boost to startups as Each fund of funds will in turn fund between 150-200 startups.

Indiagold’s cofounder Nitin Misra too has commented that overall it has been a positive budget.

“Surcharge on capital gains including unlisted shares such as ESOPs to be capped at 15% is positive, as earlier it was limited to listed shares,” he added.

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