PTI
New Delhi, May 21: Finance Minister P Chidambaram on Saturday ruled out reintroducing long-term capital gains tax on equity transactions or unilaterally reviewing the double tax avoidance treaty with Mauritius.
"There is no intention to reintroduce long-term capital gains tax on securities traded on the stock market,” said Chidambaram. “The issue of Double Taxation Avoidance Agreement has been debated threadbare. Due to host of economic, political and diplomatic reasons, the treaty cannot be reviewed unilaterally," he said at a press conference here.
The Bombay stock market fell nearly 1,300 points this week, mainly on selling by Foreign Institutional Investors (FII) who feared that the Central Board of Direct Taxes may levy higher tax from them.
The FII withdrawal had prompted the Finance Minister to clarify that no FIIs would be taxed and the fears were based on "uninformed reporting."
Following FIIs' pull out, the CPI-M had demanded that the government reintroduce long-term capital gains and dividend tax, apart from reviewing the DTAA with Mauritius, which was being increasingly used by FIIs for avoiding tax.
He also dismissed apprehensions about the economy, saying economic fundamentals were very strong and it did not undergo any change recently.
"The foreign exchange reserves were at 163 billion dollars, inflation reined in below four per cent for several weeks, manufacturing sector is growing at over nine per cent and monsoon has set in, which is expected to be good," he said.
The Finance Minister said the stock markets go beyond Sensex stocks. "In the last four trading sessions, 420 stocks have risen adding more than Rs 5,200 crore to their market capitalisation".
He said FIIs influence 10 per cent of volumes in derivatives market and 10 per cent of volumes in cash market.
"FIIs play a significant role in India like in any other market. I believe mutual funds also play an equally important role," Chidambaram said.
The Minister also said, "Indian growth story continues to be a growth story. It goes beyond stock markets and includes agriculture, services and manufacturing".