Do away with multi-tax system for cap market income: ANMI

New Delhi: As the Union Budget for FY21-22 nears, stockbrokers have sought rationalisation and streamlining of the structure for the capital market. The industry body stockbrokers Association of National Exchanges Member of India (ANMI) has written to Central Bank Direct Taxation (CBDT) on doing away with the multiple classification system for calculating tax on capital market income.

In a statement, ANMI noted that financial markets worldwide play an important role in garnering growth capital for the economy. In the years following the coronavirus pandemic, catalysing equity market participation will hold the key to reviving India's GDP growth, it added.

ANMI has urged the government to incentivise and encourage equity market investments by streamlining the tax structure applicable for market transactions in the Union Budget for the financial year 2021-22.

It has pointed out that in India, currently, there are multiple classifications for capital market income, such as speculative income, business income among others. While the intraday cash market trading is classified as speculative income, the intraday derivatives trade, on the other hand, is classified as business income.

"In fact, except India, no other country has this concept of speculative income. Globally trading positions are treated as ordinary business income and investment positions are treated as capital gains," it said.

This large variety of classification of income arising out of capital market transactions is creating fungibility problems with respect to profit or loss incurred in different types of trades, ANMI said.

The industry body also said that to boost equity market participation, the concept of speculative income should be done away with in the forthcoming Union Budget. Also, like global markets, there should be limited categories of classification of incomes - Business Income, Long-term Capital Gain and Short-term Capital Gain, for the ease of the taxpayer.