Union Bank proposes zero LTCG tax on equity held over 3 years, lower rates for shorter holdings

What happened

Union Bank of India proposed reducing the 12.5% long-term capital gains tax rate on equity held for one to three years and fully exempting gains on equity held beyond three years. The recommendations are not final; the report also suggested lowering tax on bank deposit interest.

Proposed

Global impact / market context

If adopted, lower taxes could increase investors’ after-tax returns, meaning the amount they keep after tax, and make longer equity holdings more attractive. That could support demand for shares and encourage foreign investors to commit money for longer, while lower deposit-interest taxes could improve savers’ returns.

Analyst inference

The article says listed-equity gains held for under the long-term threshold are currently taxed at 20%, while long-term gains are taxed at 12.5% above Rs 1.25 lakh in a financial year. The bank’s proposals would change these existing rules, but no adoption is reported.

Confirmed

What to watch

1. Whether policymakers adopt any change to equity capital gains tax, including the proposed full exemption for holdings beyond three years; the article reports recommendations, not a final decision. Analyst inference
2. Any detailed rates for equity held one to three years, since the report recommends reducing the current 12.5% rate but gives no proposed replacement rate. Analyst inference
3. Whether the suggested reduction in tax on bank-deposit interest for higher-income savers, to 15–20% or the applicable tax-slab rate, whichever is lower, advances. Analyst inference

Evidence

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