Feedback to Easwar Committee on Tax reform - Jan 23rd is last day

Easwar panel on tax simplification constituted by Modi Govt has submitted its first report and have given a few suggestions like categorising income upto 5 lacs as capital gains (and not business income etc ) . They have an email id where we can give our feedback after reading the report which is available in the income tax dept website

I request anyone who is interested to read my email that i have sent to them and also write to them echoing this views if you agree to my logic .

Give below the text of my email to them sent today - Remember last date for giving suggestions is 23rd Jan (just 3 days more )

Dear Sir

Today a foreign Portfolio investor who trades in indian stocks pays NIL short term capital gains tax whereas an indian trader in indian stocks pays 15% short term capital gains tax.The reason for this is that the Foreign portfolio investor has the capability to register his firm in a zero tax DTAA host country (like Dubai or mauritious or Singapore ) where the tax is Zero on such transactions.

The above leads to huge issues around Equity and Fairness - Why should a foreigner who makes money trading in indian stocks pay zero tax whereas a small indian trader has to pay 15% STCG tax just because we can not register a dummy firm in a foreign country ?

Further it is to be noted that the amount realized by indian govt from short term capital gains tax is miniscule (about 3500 crs ) . My suggestion therefore is that we must have Zero Tax on STCG on listed equity (similar to current scenario where long term capital gains on shares held over 1 year is at zero levels ).

Benefits :
1.Huge boost to investor sentiment and overall feel good factor
2.Will help govt’s disinvestment program
3.Will remove unfairness in treatment of FPIs vs indian traders
4. Amount foregone of 3500 crs can be made through STT on higher volumes
5.Alternatively STT can be raised subsequently if volumes do not go up
6.This was also mentioned in the Tarapore committee report.
7.No need to route FDI thro’ Mauritious - More transparancy.

Kindly therefore consider the solution of abolishing short term capital gains tax of 15% on listed indian equity . This will lead to Real simplification and Real easoe of doing business .


Thumbs up from me. Will send similar mail

attaching the complete proposal of easwar committee on tax simplification for easy access and reading of our members

report.pdf (441.3 KB)

Being fair should not make it a gambler’s den. It should be 15% for Foreign investors as well.


indian govt can not tax foreign traders at 15% since its governed by the DTAA (Double tax avoidance treaty ) signed by india with other countries which is a contractual commitment by govt of india . So the FPIs would need to pay tax applicable in their host country which in this case happens to be nil so foreigners effectively end up paying zero tax . So taxing foreigners at 15% is not an option due to this DTAA . As you know there are many advanced countries under DTAA obligation with india where capital gains tax is zero .Foreign money also has multiple options so we also need to look at tax competitiveness too.The only option is to see if increased volumes and STT thereof on increased volumes due to scrapping of STCG tax make up for this annual shortfall of about 3500 crs . In case this does not happen the option is to marginally increase STT which again is a very efficient form of tax collection for the govt .

Agree with your explanation.

But that problem does not exist with US / UK etc, where they are taxed worse. It is mostly from tax havens like Mauritius etc. The govt should go behind those countries to fix the DTAA, where no one expected round tripping of this magnitude. Should not sign DTAA with countries that have 0% income tax rates. Period.

And the solution definitely is not to encourage gambling further. today’s fall is a good example.

The limited mandate of Easwar committee is to give practical suggestions to simplify indian income tax . They also are duty bound to take our feedback till 23rd Jan post which accepted suggestions will be finalised with the MOF and will find place in this budget on 28th Feb . Renegotiating DTAA already agreed to or going behind the corporate veil in zero capital gains tax countries is not the mandate given to this committee .

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