Long term capital gains tax on investments made in unlisted firms, particularly start-ups, might be reduced in the upcoming budget, according to indications given by the government at Start-up India conference.
Revenue secretary Hasmukh Adhia said that a long-term capital gain tax of 20 per cent is levied on a three-year investment in an unlisted company, but holding of equity shares of a listed firm for one year is exempt from any such levy.
"I can assure you of this gap being bridged at the time of Budget," he said.
Adhia said some other tax incentives to encourage startup ecosystem, like rationalising Service Tax rules, are also likely to be announced in the Budget to be presented on February 29.
A strong pitch for removing the differential treatment of taxing long-term gains in listed and unlisted companies have been made, he said.
"The point is if somebody makes a hot investment in equity market and he keeps it for one year, there is zero capital gain after one year. Compared to that people who have been taking the risk of putting long-term equity investment in unlisted security, like in case of a startup, have to pay 20 per cent even after three years," Adhia said.
Online filing of returns under FEMA are also expected to be eased making things easier for start-ups.
Economic Affairs Secretary Shaktikanta Das said the finance ministry has held detailed discussion with the Reserve Bank of India on this.
"You will see very quick action, one which will facilitate online filing of returns," Das said.
He said interest rates in India will be comparable to those prevalent in countries like the US and Japan when inflation rate falls to their levels on a consistent basis.
Sebi member Prashant Saran said the markets regulator has been been "very proactive" to encourage startups. He said startups were welcome to approach the regulator with suggestions.