By John McNeillAUSTRALIA (Reuters) – Domains and other assets trading in the Indian stock market are subject to the same tax rates as stocks on a regular basis, while bonds and other investments are subject only to a different levy, according to data compiled by Reuters.
Domains and equity trading are not taxed under GST.
That makes it easier for investors to take on investments that are often more liquid than cash.
But the tax on the cost of buying and selling stock also is different.
India’s top five companies accounted for about 30 percent of global market capitalisation, or $3.4 trillion, according the data, based on filings by the country’s government.
The companies in the top five accounted for 80 percent of the market capitalisations in the United States.
The tax rates are lower for the securities and bonds traded by the five biggest companies in India.
The average tax rate on these assets was 25 percent in 2016-17, while the average was 23 percent in 2017-18, according data compiled on behalf of Reuters by the India Securities Research Institute.
The data also shows that Indian stocks and bonds trading in London were taxed on a flat rate of 9 percent, compared with 10 percent in New York.
In contrast, the average tax on India’s stock market was 14 percent in the second quarter of 2017.
India is among the world’s biggest markets for stock market investments, accounting for more than 40 percent of all equities traded.
The country’s tax burden is among Europe’s highest.
The European Union has been trying to ease the tax burden of companies trading in financial markets.
But the tax rules in India are not yet in place, which is likely to be the case for a while, said Pratap Jain, chief economist at PwC India, an international research firm.
“It will take time to sort out these problems,” Jain said.
The Indian stock exchange, or SBI, has been able to get away with a lower rate for a number of years.
Its top 10 equities accounted for less than 10 percent of trading volume in the country in 2015, and less than 3 percent in 2018.
In recent years, India has moved to ease some of the tax burdens on trading in equities, as it has seen a surge in investments in emerging markets such as Brazil and India.
It is now more difficult for companies to get around the tax requirements for their financial investments.
India has been using an exchange rate to calculate tax rates for the capital gains and dividends on its equities since 2017.
That allowed companies to deduct their income taxes from their taxable income, and have avoided a high tax bill.
The current rules for the tax rate apply only to the trading of securities, but the Indian government has not made any effort to set up a new exchange rate.
The Tax Department of India has not given a timetable for introducing a new tax rate.
In an email response, the department said: “The government has decided that the rate of taxation on financial assets shall be based on a ratio of tax on financial capital and a tax on income from investment and has not yet decided on a new method for the taxation of financial assets.”
The data shows that the tax levied on the value of assets traded by Indian companies is higher than the tax paid on stock.
That means that a company that has to pay tax on its share price for every share traded will pay more tax on each share sold.
That is likely a result of the high rate of tax paid by companies on stock in the past, Jain noted.
The companies in our top five listed on the Indian Stock Exchange (ISE) were mostly passive and held a lot of stock.
They tend to invest in companies that are not going public and do not hold large portfolios.
This is a reflection of the fact that most Indian companies are passive and not in the public sector,” he said.
India does not have a public pension fund, which means that some of its companies pay a lower tax rate than its corporate peers.
But a small number of companies that do have a pension fund are likely to pay lower tax rates than the larger companies in their industry, Jains said.
India is likely also to see a reduction in corporate tax rates in coming years.
(Reporting by Andrew Kelly in Bangalore; Editing by Mark Heinrich)