**Subject:** Economy The **Union Budget 2018-19** introduced significant reforms in capital gains taxation and dividend distribution, marking a shift towards a more transparent and equitable tax regime. ## Key Changes in Long Term Capital Gains Tax (LCGT) * Introduction of **10% tax on LTCG** exceeding โน1 lakh from sale of listed equity shares and equity-oriented mutual funds. * Implementation of **grandfathering provision** to protect gains made until January 31, 2018, ensuring fair transition and market stability. * Removal of **Securities Transaction Tax (STT)** exemption on LTCG, ending the previous dual benefit system. * Introduction of **indexation benefits** to adjust the purchase price according to inflation, providing relief to long-term investors. ## Changes in Dividend Distribution Tax (DDT) * **Abolition of DDT** regime where companies were liable to pay tax on dividend distribution. * Shift to **classical system of taxation** where dividends are taxed in the hands of shareholders at their applicable income tax rates. * Introduction of **Tax Deducted at Source (TDS)** on dividend payments exceeding โน5,000 annually. * Removal of additional tax of 10% on dividend income exceeding โน10 lakh for resident individuals. ## Impact and Implications * Enhanced **tax revenue mobilization** through broadening of the tax base. * Improved **market efficiency** by removing the cascading effect of dividend taxation. * Increased **foreign investment attractiveness** due to simplified tax structure and international compatibility. * Better **alignment with global practices** of dividend taxation, making Indian markets more competitive. The reforms in LCGT and DDT represent a significant step towards creating a more **transparent and efficient tax ecosystem**. These changes have helped in achieving the twin objectives of **revenue generation and market development**, while aligning with international best practices like those followed in **OECD countries**.