3.4 Lakh escape the tax on capital gains, MF sales

3.4 Lakh escape the tax on capital gains, MF sales

More than 3.4 lakh holders trading in classified equity shares and mutual funds are accused of evading or not disclosing long-term capital gains tax, an estimate by the income tax department revealed, leading officials to ignore demands for elimination of the levy introduced two years ago.

Data analysis on the impact of LTCG showed that in 2018-19, around 91,000 individuals and Hindu Undivided Families (HUFs), or 16 percent, did not file returns on listed shares and mutual funds that sold listed shares or mutual funds exceeding Rs 20 lakh. The selling value of these shares and units of the mutual fund was valued at 99,000 crore rs.

About 2.5 lakh individuals and HUFs, or 44 percent of the population who sold shares or MF units, reported either zero or significantly reduced interest in their income tax returns although the sales added up to more than Rs 4 lakh crore. The government has yet to decide the course of action to be taken against these bodies. This may explain why there is a desire for the elimination of LTCG and Securities Transaction Tax (STT) so that people’s earnings from shares etc. are not included in their taxes … When LTCG is eliminated, it will open up a major backdoor for tax avoidance, “an officer stated.

Government sources have said the tax also helps trace shareholders who would otherwise have gone unnoticed if they don’t pay income tax. Many of the penny stock transactions or those involving black money can be traced along this path, officials argued

“For decades, it has been a normal tax globally of approximately 95 percent, including the United States, Canada, Australia, China and several European countries levying it,” said the official, while pointing out the tax varies from 10 percent to 35 percent on profits from the sale of shares or mutual fund units.

The sources said demands for removal of a levy imposed two years ago were not in line with tax policy recommendations for stability and continuity.

Starting in April 2018, the selling of shares and equity-oriented mutual funds, held for one year or more, began to receive 10 percent LTCG (plus cessation) if a year’s benefit reached Rs 1 lakh.

Latest Updates

• ITR-1 vs ITR-2 vs ITR-4 for AY 2026-27: How to Choose the Right Income Tax Return Form
  ITR-1 vs ITR-2 vs ITR-4 for AY 2026-27: How to Choose the Right Income Tax Return Form Filing your Income Tax Return (ITR) begins with one critical decision—selecting the correct return form. While it may seem like a minor step, choosing the wrong form can result in your return being treated […]
• Who Qualifies as a Relative Under the Income-tax Act, 1961?
  Who Qualifies as a Relative Under the Income-tax Act, 1961? The term “relative” may appear straightforward, but under the Income-tax Act, 1961, it does not have a single universal definition. Instead, its meaning changes depending on the section and the purpose for which it is used. This distinction is important because […]
• GST at 9: Nine Years of India’s Biggest Tax Reform – Achievements, Challenges & The Road Ahead
  GST @ 9: Nine Years of Transformation, Challenges, and the Future of India’s Indirect Tax System From “One Nation, One Tax” to AI-driven tax administration, GST has transformed India’s indirect tax landscape over the last nine years. While the reform has simplified taxation and strengthened compliance, businesses continue to grapple with […]
• Penalties and Prosecution Under the Income-tax Act, 1961: A Complete Guide for Taxpayers (AY 2026-27)
  Penalties and Prosecution Under the Income-tax Act, 1961: A Complete Guide for Taxpayers (AY 2026-27) Tax compliance is one of the most important responsibilities of every taxpayer in India. The Income-tax Act, 1961 not only prescribes procedures for filing returns and paying taxes but also contains strict provisions for penalties and […]
• July 2026 Statutory Compliance Calendar: Important Due Dates Under GST, Income Tax, FEMA, SEBI, PF/ESI & Companies Act
  July 2026 Statutory Compliance Calendar: Important Due Dates Under GST, Income Tax, FEMA, SEBI, PF/ESI & Companies Act As the first month of the second quarter of the financial year progresses, July 2026 brings a packed schedule of statutory compliance obligations for businesses, employers, professionals, tax deductors, and companies. From GST […]