Mumbai, July 17 (KNN) Few weeks after instances of many entities using the SME exchange of BSE for money laundering came to the limelight, Bombay Stock Exchange (BSE), in a letter to the Finance Minister, has suggested removal of the long-term capital gains tax exemption on transactions in stocks.

The suggestion comes at a time when capital market regulator Sebi found hundreds of entities misusing the stock market platform to launder black money and evade taxes, including through BSE's own SME platform.
The BSE said such events have taken place because of the tax arbitrage arising out of the exemption from long-term capital gains tax.


"Upon the securities being free lock-in, the entities sell off the same through stock exchanges by paying the small amount of securities transaction tax (STT) and get full benefit of exemption from long term capital gain tax (LTCG)," BSE said in the letter, reports media.

"It seems therefore that the hidden reason of some of these companies that are traded infrequently/not available for trading is primarily to get huge LTGC tax benefit by paying minuscule amount of STT," BSE added.

BSE has proposed that the "current differential capital gains treatment between listed and unlisted securities should be harmonised" to prevent any tax arbitrage and tax evasion. (KNN Bureau)