Tax INCENTIVES FOR CAPITAL MARKET ..

Capital market plays an important role in the economic growth of a country. Government has provided certain tax incentives for strengthening capital market.

In order to encourage investments in the equity shares of domestic companies, dividend received from domestic companies has been exempted in the hands of shareholders with effect from June 1, 1997.

Further, in order to give incentive for investment in equity shares, long terms capital gain arising from transfer of equity shares or units in equity oriented mutual fund, chargeable to securities transaction tax has been exempted under Section 10(38) with effect from October 1, 2004.

Moreover, short term capital gain in this case has been taxable at a lower rate i.e. 10 per cent till October 1, 2004 (15% from 34 A.Y. 2009-10).

The assessee has been provided two options for taxation of long term capital gain arising from listed securities (other than equity shares or units in equity oriented mutual fund) under Sec. 112 i.e. to pay tax at 20 per cent with indexation or to pay tax at 10 per cent without indexation whichever is lower.    

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