Non-bank lenders are seeking a rollback of the budget announcement that has classified returns on market-linked debentures (MLD) as short-term capital gains, resulting in higher taxation on such investments.
In a letter addressed to Finance Minister Nirmala Sitharaman, the Finance Industry Development Council (FIDC) has said that the budget provision would dent the ₹75,000-crore industry and sought parity in the taxation framework for all debt products.
“We believe that increasing the tax burden would have a negative effect on investors, and completely stifle the participation of such investors in the MLD market,” the letter states. “Looking at the investor sentiment, the impact gets further accentuated since this amendment seeks to introduce a retrospective amendment.”
Non-banks have proposed extending the benefits of long-term capital gains if these instruments are held for more than a year. “Our request is to align the taxation framework for all debt products and bring them in line with equity and equity mutual funds, providing LTCG benefit if the holding period is more than one year for listed instruments,” the appeal states.