India rejects plans to raise taxes on the wealthy

Although India has changed some tax rates for individuals and businesses, sources say it is still working on other issues such as capital gains.

The Income Tax Department of India has disputed that there is a proposal to raise capital gains taxes on the country's wealthiest citizens.

It follows a Bloomberg report that the country is "reviving a proposal to reform its direct tax system."

On April 18, the department's official Twitter account emphasised that no proposal on capital gains tax had been presented.

Despite recent changes, sources say it has been extremely difficult to raise capital gains taxes on the wealthy in India.

Prime Minister Narendra Modi visited the G20 Leaders' Summit in November, where he discussed the reform of numerous income tax rules, and recent reports indicated that the government planned to overhaul the capital gains structure following several proposals to simplify it.

India already taxes the highest earnings up to 30% of their income, and one Twitter user wrote, “The system is unfair, there is no equality when it comes to gains tax, and it seems that the rich are favoured.”

According to the most recent budget report, India intends to "reduce the compliance burden, promote entrepreneurial spirit, and provide tax relief to citizens" beginning in February 2023.

The tax rate on capital gains in India is determined by several criteria, including the type of asset, the holding period, and the amount of gains realised. Short-term capital gains can be taxed at up to 35.88%, while long-term capital gains can be taxed at up to 23.92%.

According to one source, the Indian government is attempting to strike a compromise between a variety of competing interests.

"New direct tax laws would complete the tax overhaul, boosting living standards across the population, which is critical for the Indian government to market India as a consumer destination that global businesses should target," Tarun Garg, a tax director for Deloitte in Haryana, said.

"While India has tweaked some tax rates and exemptions for individuals and businesses, it is still working on other issues, such as standardising capital gains tax rates."

"The government tried to address this issue partially in the recent budget by taxing debt funds at the income tax slab rate," he continued.

According to Oxfam International, the richest 10% of India's population controls 77% of the country's wealth.

By fLEXI tEAM