The Indian Income Tax department has denied reports that the government is considering raising capital gains taxes on high-income earners by reforming the tax system. The department stated on Tuesday that “there is no such proposal before the Government on capital gains tax.”
The Bloomberg report published on Tuesday said that the government is preparing an overhaul of its direct tax laws to replace a byzantine matrix of rules that will help reduce widening income inequality. It said that the Centre was working to increase the capital gains taxes for top-income earners, citing sources.
The report said, “At the heart of the rework is potential increases in capital gains taxes for top income earners, the people said, asking not to be identified as the details are private. For instance, while India levies a tax of as much as 30 per cent on income, it taxes gains on certain asset classes such as equity funds and stocks at a lower rate.”
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Sources told Bloomberg that a panel may be appointed to build on proposals submitted to the Finance Ministry in 2019 with an eye to implementing them in 2024, though no final decisions have been made.
Economists frequently point to India’s reliance on indirect taxes, or levies on consumption, rather than direct taxes on capital as the key reason why the country’s poor are left behind, despite the country producing 70 new millionaires every day between 2018 and 2022, the report noted.
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It also said that the government is looking to “replace India’s complicated tax system with a simpler law to draw in companies looking to shift their operations out of China amid growing tensions between Washington and Beijing”.