Budget 2020: Relax tax on long term capital gains

Budget 2020: Relax tax on long term capital gains

By Snapdeal Spokesperson

ESOPs are meant to reward the team that helps build a successful enterprise. Current laws tax the ESOPs prematurely when options are exercised. ESOPs should be taxed only when an employee has realised a benefit with regard to the same. Taxation should follow actual gains and not notional gains. Moreover, Founders/Promoters should be permitted to receive ESOPs - this is currently not allowed.

Also, taxing sales of unlisted equities at the same rates as listed equities can be favorable to founder/investors. The long term capital gain rates should be the same for listed and unlisted equities. For startup founders, employees and domestic investors, currently the tax rate of long term capital gains is 28.5% compared to the same for listed equities to be 10%. This creates a significant tax burden on founders and employees of startups as well as domestic angel and institutional investors, who take the risk to back these companies. This discrimination in tax rates shouldn’t exist as it creates a significant economic disincentive for those owning equity in startups.

In addition to these, I hope the tax limit is reduced on income above INR 5 lakhs. While any taxation changes will not impact CTCs, it will definitely improve purchasing power. More money in the hands of consumers will boost demand for goods and services including those offered by Internet companies which will, in the long run, benefit the economy.

These moves will be a game-changer for the industry and we are looking forward to the budget 2020, Snapdeal spokesperson said,