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Jaswant open to rethink on dividend taxation

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The Finance Minister, Mr Jaswant Singh, along with (right to left) Mr Rajan B. Mittal, Mr Sagar Suri, Mr S.K. Birla and Mr A.C. Muthiah at a meet in the Capital on Saturday.

NEW DELHI, March 1

THE Finance Minister, Mr Jaswant Singh, has said that he was open to `re-addressing' the Budget proposals relating to taxation of dividends distributed by companies and confining abolition of long-term capital gains tax to only listed shares acquired on or after March 1, 2003.

Speaking at a National Conference on the Union Budget, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) here on Saturday, the Finance Minister said that allowing long-term capital gains exemption on a retrospective basis - i.e. on shares acquired prior to March 1 - was not desirable in the current `exceptional' geopolitical circumstances.

Given the uncertainty with regard to international crude prices and possible outbreak of war in the Gulf, there was every possibility of investors `dumping' their holdings in possession for the last four to five years.

The abolition of long-term capital gains tax on a retrospective basis, therefore, was not desirable in the present context, where large-scale selling of shares in possession for extended periods would further depress the country's capital markets.

Mr Singh said that this was something that he could not allow to happen, as "I have a responsibility to the small investor and the capital market too." He, however, added that "if the war like situation some day dissolves itself, and if the situation becomes reassuring", the issue could be readdressed. "But I cannot, at this moment, give you the assurance that you seek," the Minister said, replying to a query posed by the FICCI President, Mr A.C. Muthiah.

He also assured captains of industry that the Government was willing to `reconsider' the imposition of the 12.5 per cent dividend distribution tax levied in the Budget in place of the earlier 10 per cent tax levied at the hands of shareholders. The former FICCI President, Mr Sudhir Jalan, said that the dividend distribution tax was tantamount to a double taxation of corporate earnings.

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