💥Join UPSC 2027,2028 Mentorship (July Batch) + XFactor Notes & Microthemes PDF
Talk to Mentor

Civilsdaily

Login

GS Paper: Indian Economy

  • GST revenues cross 1.3 lakh crore in Feb

    The Gross Goods and Services Tax (GST) revenue in February was 26% higher than the pre-pandemic levels at ₹1,33,026 crore.

    What is GST?

    • GST is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
    • The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017. It is a single domestic indirect tax law for the entire country.
    • It is a comprehensive, multi-stage, destination-based tax that is levied on every value addition.
    • Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

    Answer this PYQ in the comment box:

    Q.All revenues received by the Union. Government by way of taxes and other receipts for the conduct of Government business are credited to the (CSP 2015):

    (a) Contingency Fund of India

    (b) Public Account

    (c) Consolidated Fund of India

    (d) Deposits and Advances Fund

     

    [wpdiscuz-feedback id=”91v2rbtz17″ question=”Please leave a feedback on this” opened=”1″]Post your answers here.[/wpdiscuz-feedback]

    What are the components of GST?

    There are three taxes applicable under this system:

    1. CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
    2. SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
    3. IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

    Advantages Of GST

    • GST has mainly removed the cascading effect on the sale of goods and services.
    • Removal of the cascading effect has impacted the cost of goods.
    • Since the GST regime eliminates the tax on tax, the cost of goods decreases.
    • Also, GST is mainly technologically driven.
    • All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

    Issues with GST

    • High operational cost
    • GST has given rise to complexity for many business owners across the nation.
    • GST has received criticism for being called a ‘Disability Tax’ as it now taxes articles such as braille paper, wheelchairs, hearing aid etc.
    • Petrol is not under GST, which goes against the ideals of the unification of commodities.

    Take a look at the share of GST in government earnings for the previous fiscal:

    UPSC can ask about the majority component of the Revenue Receipts of the govt. See how Corporate tax is nearing the GST revenues.

    Do you think it will surpass GST revenue when the economy is fully recovered?

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • How Russia-Ukraine conflict will effect inflation in India

    Context

    With the Russia-Ukraine conflict flaring into a war, global commodity prices, especially that of crude oil and gas, are likely to see a strong surge. This poses a challenge not only for India to contain inflationary pressures but also the world at large.

    The problem of rising inflation

    • At 6 per cent, India’s consumer price index (CPI) inflation crossed the upper limit of RBI’s tolerance band in January 2022.
    • Implications: High inflation inflicts a large “inflation tax” on the general public whose bank savings earn an interest of less than 1 per cent.
    • This is robbing the general public in the name of fuelling growth.
    • India is not impervious to this tendency. Most of the major banks in the country offer interest rates between 3 to 4 per cent to depositors.
    • Both the finance ministry and the RBI are betting on revving up growth, at least for the time being.
    • This is fine as long as they can tame inflation within reasonable limits.
    •  If we want to do justice to the masses on whose deposits the entire banking system hinges, one must ensure positive real rates of interest.

    How to ensure lower rates of inflation

    • Given that food has a weight of more than 45 per cent in CPI in India, understanding the dynamics of food inflation is critical.
    • India imports roughly 60 per cent of its consumption of edible oils, and global prices of edible oils have gone up by more than 50 per cent over the last year.
    • Edible oil inflation in India was touching 35 per cent a few months back.
    • This has come down to 18 per cent after the reduction on import duties.
    • The Union Minister of Commerce has also recently claimed that they have brought down the inflation in pulses by imposing stock limits on traders and by lowering import duties and importing more pulses.
    • The Centre has also imposed stocking limits on domestic oil/oilseed traders. 

    Way forward:  Reform the grain-management-cum-food-subsidy system

    • Stock limit on wheat and rice with FCI:  As on January 1, it is saddled with stocks that are almost four times the buffer stock norms.
    • By unloading the excess grain in the open market, FCI could help in bringing down food inflation substantially as rice and wheat have a high weightage in CPI.
    •  In the name of the poor, India runs one of the largest but perhaps the most inefficient and corrupt public distribution system (PDS) in the world.
    • Stop competitive populism: Every political party promises freebies before elections.
    •  Unless the Election Commission comes down heavily on such promises or a public interest litigation is filed in the Supreme Court to stop this competitive populism, Indian policymaking cannot be growth-oriented.
    • Reduce the population coverage under PDS:  India’s food subsidy policy covers 67 per cent of the population and distributes rice and wheat at more than 90 per cent subsidy under the National Food Security Act of 2013.
    • Raise productivity: This should be combined with taking giant strides to raise productivity and producing more nutritious food while protecting the environment.
    • Focus on R&D in agriculture: It’s well-known agri-R&D gives a much higher return in terms of promoting growth with competitiveness, and reduces poverty by making food cheaper and controlling food inflation

    Conclusion

    It is important to reform the grain-management-cum-food-subsidy system to release precious resources for growth of agriculture.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • India risks being left out of TRIPS waiver

    Context

    When the Covid-19 pandemic pounded the globe, India, with South Africa, piloted a proposal to waive key provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement on Covid-19 vaccines.

    Significance of TRIPS waiver for Covid-19 related  medical products

    • The TRIPS agreement is part of the international legal order on trade enshrined in the World Trade Organization (WTO).
    •  The core idea behind the proposal is that intellectual property (IP) rights such as patents should not become a barrier in scaling up the production of medical products like vaccines, diagnostics and therapeutics essential to combat Covid-19.
    •  However, the WTO has failed to adopt a TRIPS waiver to date.
    • Geographically limited waiver: The developed world is talking of a TRIPS waiver that would be geographically limited and exclude India.
    • This is a failure of India’s economic diplomacy.
    • There are also attempts at limiting the waiver to vaccines alone, leaving out diagnostics and therapeutics.

    Domestic factors that affected India’s global campaign for TRIPS waiver

    1] India failed to use provisions under Indian Patent Act

    • During the entire pandemic, India rarely made use of the existing flexibilities under the Indian Patent Act, such as compulsory licences (CL), which are consistent with the TRIPS agreement, to increase the supply of Covid-19 medical products despite being nudged by the judiciary to do so.
    • On the contrary, during the peak of the second Covid wave, the central government filed an affidavit in the Supreme Court stating that the main constraint in boosting the production of key drugs is the unavailability of raw materials, not IP-related legal hurdles.
    • .This stand completely contradicted India’s argument internationally that views IP as an obstacle to augmenting the supply of Covid-19 medical products.

    2] Lack of national strategy

    • India did not proactively develop a national strategy to implement the TRIPS waiver as and when it is adopted.
    • In other words, a TRIPS waiver at the WTO would only be an enabling framework.
    • It would then require member countries to amend their domestic IP laws to implement the waiver.

    3] Failure to involve Indian pharma industry

    • The government failed to get the Indian pharmaceutical industry on board.
    • Pharmaceutical bodies are a divided lot with many Indian companies speaking against the waiver, thus denting India’s global campaign.

    4] Failure to walk the talk on indigenously developed Covaxin

    • India should have unlocked the technical know-how of Covaxin to the world.
    • While technology transfer agreements for Covaxin have been inked with domestic companies, making the vaccine technology available to anyone interested globally, at a minimal price.
    • This would have exhibited India’s resolve to walk the talk on the TRIPS waiver.

    Conclusion

    While India would oppose the attempted exclusion, the lesson is that for economic diplomacy to flourish, it should be backed by concrete actions on the domestic front.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Who are the Angadias?

    An FIR has been registered against some Mumbai Police officials last week for allegedly threatening Angadias and extorting money from them in south Mumbai.

    Who are Angadias?

    • The Angadia system is a century-old parallel banking system in the country where traders send cash generally from one state to another through a person called Angadia that stands for courier.
    • It is by and large used in the jewellery business with Mumbai – Surat being the most popular route as they are two ends of the diamond trade.
    • The cash involved is huge and it is the responsibility of the Angadia to transfer cash from one state to another for which they charge a nominal fee.
    • Generally, it is the Gujarati, Marwari and Malbari community that are involved in the business.

    How does the system work?

    • The Angadia system works completely on trust as large sums, at times in crores, are involved.
    • Generally, traders have the same Angadias for decades together.
    • If a trader from Zaveri Bazaar in south Mumbai wants to pay a diamond trader in Surat, he will send an Angadias who usually delivers the money within 24 hours.
    • They also have fixed trains that leave from Mumbai at night and reach Gujarat by early morning.
    • Usually, to verify authenticity, the trader will, for example, will give a Rs 10 note to the Angadia and provide the number of the note to the recipient.
    • It is only after the recipient confirms the note number that the Angadia will hand over the money to the person.
    • After making the payment, the Angadias return to Mumbai the same day.

    Is the system legal?

    • While the Angadia system per se is legal, there hangs a cloud over the activity as it is suspected that a lot of times it is used to transfer unaccounted money.
    • Since the business deals in cash and there is no account maintained for the same, there have been suspicions that it is also used for transfer of black money like the hawala.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Issues with corporate governance in the context of NSE scam

    Context

    Over the past 10 days, the revelations about the functioning of the National Stock Exchange (NSE) during the tenure of Chitra Ramkrishna as Managing Director and Chief Executive Officer (CEO) have raised questions about the governance.

    Managerial misconduct at NSE

    •  There was managerial misconduct at NSE.
    • An effective board of directors: That is why we need checks on management such as an effective board of directors.
    • After the board was informed about the irregularities in Mr. Subramanian’s appointment, it discussed the matter but chose to keep the discussions out of the minutes on grounds of confidentiality and the sensitivity of the matter.
    • Second, despite being aware of Ms. Ramkrishna’s transgressions, it allowed her to resign and on generous terms instead of taking action against her.
    • Third, the Public Interest Directors (PIDs) failed to keep SEBI informed about the goings-on at the NSE.

    Issues with corporate governance

    • In the corporate world, much is forgiven on grounds of performance.
    • When a performing CEO chooses to unduly favour a particular individual or individuals, boards see that as a forgivable infirmity.
    • As for dysfunctional or ineffective boards, these remain the norm despite numerous regulations, seminars and papers over the past four decades.
    • In case of the the NSE, the problem is structural.
    • Selection and absence of penalty: It has to do partly with the way board members are selected and partly with the absence of penalties where directors do not live up to their mandate.
    • Board members are selected by top management (or, in India, by the promoter who is also top management).
    • Board members have every incentive to nod their heads to whatever the management wants to be done.

    Way forward

    • 1] Diversity in the selection of board members: As long as the top management selects all board members or can influence their selection, there is little hope of any active challenge to management.
    • The top management must be allowed to choose not more than 50% of the independent directors.
    • The rest must be chosen by various other stakeholders — financial institutions, banks, small shareholders, employees, etc.
    • 2] Accountability of board members: A second thing that needs to happen is holding board members accountable for lapses.
    • Regulators act against directors where there is financial malfeasance.
    •  This must change. Regulators must penalise errant directors through a whole range of instruments — strictures, financial penalties, removal from boards and a permanent ban from board membership.
    • 3] Accountability of regulator: Regulators themselves must be held to account.
    • In the NSE affair, questions have been asked of SEBI.
    •  For instance, why did SEBI not seek the help of the cyber police to ascertain the identity of the yogi?
    • SEBI needs to explain itself.

    Conclusion

    Convulsions of outrage after particular episodes will not take us very far. We need significant institutional reform if corporate governance is not to remain an illusion.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • What are Participatory and Non-Participatory Funds?

    The amendment to Section 24 of the LIC Act, brought prior to commencing the IPO, segregated the previously single ‘Life Fund’ into the participatory and non-participatory fund.

    What are Participatory and Non-Participatory Funds?

    • Under a participatory policy, a policyholder can get a share of the profits of the company.
    • This is received as a bonus. Examples of such products offered by LIC include  Jeevan Labh and  Bachat Plus.
    • No such sharing of profits happens under non-participatory products, which under the LIC fold includes policies such as  Saral Pensionand  Nivesh Plus.
    • As all insurance companies do, LIC also reinvests premium monies that policyholders pay.
    • The profits or surplus that comes about, as a result, was till September last year held in one single fund. This was the Life Fund.
    • The surplus was divided in the 95:5 ratio between policyholders (in the form of bonuses) and shareholders (in the form of dividends).

    What has the Amendment changed?

    • But the amendment to Section 24 of the LIC Act has necessitated the segregation of the Life Fund into participatory and non-participatory funds, depending on the nature of the policies they support.
    • The amendment stipulates terms on how surplus is to be shared with respect to participatory and non-participatory funds.
    • As for non-participating funds, surplus from the non-participating business would be transferred to shareholders.
    • Surplus from participatory business, however, would be shared between policyholders and shareholders.

    How does this change impact the shareholder?

    • The change, especially the one that has enabled 100% of the surplus in non-participatory funds to flow to the shareholder, has led to a massive jump in the Indian Embedded Value, or IEV.
    • IEV is a measure of future cash flows in life insurance companies and the key financial gauge for insurers.
    • The embedded value will help establish the market valuation of LIC and determine how much money the government raises in the flotation.
    • That will be crucial for the government to help meet its divestment targets and keep its fiscal deficit in check.

    Why is it a risk, then?

    • LIC has stated in the document that a significant portion of its business premiums come from participating and single premium products.
    • It added, should the participating products generate lower than expected returns for policyholders, it could lead to increased surrenders.
    • This could also potentially bother their financial condition, operations, and cash flows.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • India, UAE to sign Comprehensive Economic Partnership Agreement (CEPA)

    India and the United Arab Emirates will sign the first-ever bilateral Free Trade Agreement between the two countries.

    What is CEPA?

    • The partnership agreement or cooperation agreement is more comprehensive than an FTA.
    • CECA/CEPA also looks into the regulatory aspect of trade and encompasses an agreement covering the regulatory issues.
    • CECA has the widest coverage. CEPA covers negotiation on the trade in services and investment and other areas of economic partnership.
    • It may even consider negotiation in areas such as trade facilitation and customs cooperation, competition, and IPR.
    • India has signed CEPAs with South Korea and Japan.

    What is a Free Trade Agreement (FTA)?

    • An FTA is a pact between two or more nations to reduce barriers to imports and exports among them.
    • Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.
    • The concept of free trade is the opposite of trade protectionism or economic isolationism.

    Key benefits offered by FTA

    • Reduction or elimination of tariffs on qualified: For example, a country that normally charges a tariff of 12% of the value of the incoming product will rationalize or eliminate that tariff.
    • Intellectual Property Protection: Protection and enforcement of intellectual property rights in the FTA partner country is upheld.
    • Product Standards: FTA enhances the ability for domestic exporters to participate in the development of product standards in the FTA partner country.
    • Fair treatment for investors: FTA provides treatment as favorably as the FTA partner country gives equal treatment for investments from the partner country.
    • Elimination of monopolies: With FTAs, global monopolies are eliminated due to increased competition.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • After the Budget’s ‘crypto signal’, India awaits reform

    Context

    In the Union Budget speech, Finance Minister Nirmala Sitharaman announced a 30% flat tax rate levied on any gains made from the transfer of virtual assets including cryptocurrencies and Non-Fungible Tokens (NFTs).

    What is cryptocurrency?

    • Cryptocurrency (crypto) consists of a digital denomination designed to work as a medium of exchange through a distributed computer network (a blockchain) that is not reliant on any central authority such as a government or a bank for its upholding and maintenance.
    • Legal status: The announcement of the tax by the Finance Minister now leads to the assumption that crypto is legal in India.
    • Foreseeable are changes that would, down the road, legitimize and formally legalize the activities of crypto start-ups and enable them to access the necessary support system which might not have been available previously.

    What are the implications of taxing cryptocurrencies in India?

    • While critics are right in observing that the 30% flat tax rate is a harsh rate, this is a premium and price well-worth paying in exchange for what is effectively a ruling-out of prospects for a total ban on crypto by the central government.
    • Scope for innovation: The high tax rate would inevitably hamper the willingness of investors to convert cryptocurrencies into national fiat, this may, in turn, open up more doors for technologically savvy and innovation-minded investors.
    •  The extremely high tax rate and the fact that the losses cannot be offset would invariably propel investors to turn to alternative means of storing and undertaking transactions in cryptocurrencies, without foregoing the significant losses involved as they “switch” back into the rupee.
    • An inadvertent upside of this, then, is the prospective conversion and reallocation of crypto-funds from one form to another.
    • Such transformations would involve DeFi (Decentralised Finance) activities such as staking, lending, and providing liquidity, among others.

    Scope for DeFi in India

    • DeFi (or “decentralized finance”) is “an umbrella term for financial services on public blockchains.
    • With DeFi, one can do most of the things that banks support — earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more — but it is faster and does not require paperwork or a third party. 
    • DeFi is global, peer-to-peer (meaning directly between two people, and not routed through a centralised system), pseudonymous, and open to all.
    •  The processes highlighted above would drive innovation in the field of Indian DeFi.

    Concerns

    • Low participation due to high rate: The community of small and medium-sized enterprises (SMEs) and lower-end high net-worth individuals are going to find it most difficult to access the ecosystem given the substantial barriers posed by the tax rates.
    • Lack of clarity: Additionally, when it comes to India’s crypto policy at large, there is a fundamental lack of clarity in aspects other than taxation.
    • There appears to be a push to treat crypto as purely an asset class than a currency.
    • The consolation offered by the Government in the form of the Reserve Bank of India’s CBDC, or Central Bank Digital Currency, will definitely help in pushing for the adoption of digital currencies, but, equally, defeats the fundamental purpose of cryptocurrency, which is decentralization.

    Suggestion

    • Reduce the tax rate:  There is a need to reduce tax rates in the future, though this must be weighed against considerations concerning government revenue and the need to curb speculative bubbles surfacing in relation to the currency.
    • Incorporation of insights: The second reform constitutes the incorporation of insights from seasoned partners from international communities, the key should rest with engaging these individuals for their insights and advice on the best practices associated with cryptocurrency policymaking.

    Consider the question “What is DeFi (decentralised finance)? What are the implications levying high tax on the cryptocurrencies?”

    Conclusion

    Systemic reforms are by no means easy, but they are critical as an amplifier of the successes that India has already accrued in the field and as an accelerator of India’s advancement in the sphere of crypto finance and blockchain social policymaking.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

  • Time to rationalise fuel taxes

    Context

    The disconnect between retail and wholesale inflation suggests that the two measures are driven by distinct and unrelated shocks.

    The disconnect between retain inflation and wholesale inflation

    •  In the months between April 2020 and November 2020, retail inflation remained above 6%, while average wholesale inflation was -0.20%.
    • During the financial crisis (2008-2009) wholesale inflation came down significantly as commodity prices crashed after a boom, but retail inflation kept rising.
    • Correlation: This disconnect is reflected in the contemporaneous correlation between these two measures of inflation, which we find to be very low (0.04), and not significant.

    Understanding the reasons for the disconnect

    •  We cannot rule out feedback from wholesale inflation to retail inflation.
    • To better explore this, it helps to understand the driving forces behind retail and wholesale inflation. 
    • Driving factors for CPI: Retail inflation is closely linked to food and beverage prices, partly because of their higher weightage in the consumer price index (CPI).
    • The dominance of supply shocks: High retail inflation in 2020 was primarily due to the rising prices of food and beverages.
    • The surge was likely led by the usual supply shocks—rainfall, agricultural productivity, or Covid-19-induced supply shocks.
    • This suggests two important features of Indian retail inflation: it is predominantly led by supply shocks (food inflation shock) and it is transitory in nature.
    • Driving factor for WPI: High wholesale inflation in recent months was mainly due to rising prices in fuel and power and manufacturing, which together comprise around 77% of the wholesale price index (WPI).
    • Rising fuel and energy prices in India were a result of the recent increase in global oil prices.

    Takeaways

    • High wholesale inflation should not warrant any immediate policy responses as the two inflation measures seem to reflect different things.
    • Overall, the high correlation between world energy inflation and India’s wholesale inflation (0.88) indicates that India’s wholesale inflation is predominantly driven by world commodity prices.
    • On the other hand, the low correlation between India’s retail inflation and world energy inflation (-0.13, and not significant), suggests that India’s retail inflation is primarily driven by domestic food prices.
    • Higher wholesale inflation implies a higher profit margin for producers, which acts as an incentive for investment
    •  There are, in fact, some early signs of a revival in investment in recent quarters, and policy must be careful not to derail this.

    Policy options

    • Given the pass-through of wholesale inflation into retail inflation, if the ongoing commodity boom persists, then the fuel and power component of the WPI is likely to raise retail inflation directly.
    • At that point, there would be some urgency to increase the interest rate, which may be premature and could dampen the revival of growth prospects.
    • To avoid the interest rate response, the best option going forward would be to rationalise fuel taxes, to reduce the pass-through of global commodity prices into wholesale prices and ultimately into retail inflation.

    Conclusion

    The correct fiscal-monetary coordination requires fiscal policy not to be inflationary, so that the RBI can support growth by keeping interest rates low.

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)

    Source:

    https://www.financialexpress.com/opinion/time-to-rationalise-fuel-taxes-oil-is-a-major-input-in-production-hence-a-tax-on-it-is-highly-inflationary/2430635/

  • Capital Gains Tax

    The capital gains tax structure in India is complicated, and it is time for a relook since the union budget has provisions for 30% tax on cryptocurrency.

    What is Capital Gains Tax?

    • Capital gains tax is levied on the profits made on investments.
    • It covers real estate, gold, stocks, mutual funds, and various other financial and non-financial assets.

    Types

    • It is divided into long-term capital gains tax (LTCG) and short-term capital gains tax (STCG) depending on how long you have held the investment in question.
    • Unlike income tax, the percentage of tax does not change on the basis of your overall tax slab.
    • The LTCG tax, excluding surcharge, on equity is the same for gains of ₹10 lakh or ₹10 crore.
    • There is also a separate set of deductions that apply to LTCG, which do not apply to ordinary income.

    Why is it so complicated?

    Capital gains tax is complicated for a few primary reasons.

    • First, the rate changes from asset to asset. LTCG tax on stocks and equity mutual funds is 10% but on debt mutual funds is 20% with indexation.
    • Second, holding period changes from asset to asset. The holding period for LTCG tax is two years in real estate, one year for stocks, and three years for debt mutual funds and gold.
    • Third, exemptions available against it come with their own complex conditions. For instance, buying a house after selling one can get you an exemption, but the new house must be bought in two years or built in three years of the sale.

    Is cryptocurrency taxed as capital gains?

    • The 2022 budget has proposed a 30% tax on cryptocurrency, which is higher than capital gains tax in many cases.
    • Besides, under capital gains tax, investors can adjust profits and losses on different investments against each other or against profits/losses in the future.
    • However, this cannot be done with cryptocurrency.

    What distortions does it create?

    • As capital gains tax is the same regardless of your overall income it can compound inequality.
    • For instance, a person with a salary of ₹40 lakh will pay 30% tax on it but just 10% LTCG tax on gains from stock trading.
    • A person with a salary of ₹5 lakh will pay a 5% tax on it but the same 10% LTCG tax on stock trading.
    • Second, the smaller one-year qualifying period for LTCG in stocks compared to three years in debt mutual funds may encourage short-term trading in equity.

    What can be done to fix these anomalies?

    • The government can bring about uniformity in rates and holding periods for various assets to ensure that the tax for one asset is not more attractive than another.
    • A uniform and long holding period to qualify for LTCG can also discourage short-term trading and speculative  behavior  in assets  such as  stocks.
    • The exemptions for LTCG such as reinvestment in another house property or capital gains bonds can also be made simpler, with fewer conditions.
    • Small investors can also be given relief by reducing rates of capital gains.

     

    UPSC 2022 countdown has begun! Get your personal guidance plan now! (Click here)