Prior to this, long-term capital gains arising from the transfer of long-term capital assets, being equity shares of a company or a unit of equity oriented fund or a unit of business trust, was exempt from income-tax under clause (38) of section 10 of the Act.
However, transactions in such long-term capital assets are liable to securities transaction tax (STT).
"This regime is inherently biased against manufacturing and has encouraged diversion of investment to financial assets.
"It has also led to significant erosion in the tax base resulting in revenue loss. The problem has been further compounded by abusive use of tax arbitrage opportunities created by these exemptions," the FAQs stated.
The exemption has now been withdrawn to minimise economic distortions and curb erosion of tax base, it added.