I was just reading few posts here, couldn’t stop myself from expressing out certain things which looks like a loop. First the article here is hilarious to say the least. When he couldn’t justify higher tax in percentage turned to subjective.
- Don’t buy and sell frequently, chose all weather stocks. If you hold long your return will be huge, what a conclusion. My return depends on my engagement with market not long, short, tall, fat etc. If you have stories have multi bagger then you have multi draggers also.
- Invest through MF, why? Trading is done by fund manager inside fund. Aha, right now you said no selling/buying; then why trading? Because I hold I won’t pay taxes. The tax paid by fund manager on trading will be paid out of pocket and get added to NAV. Bravo!
I am really puzzled how an income tax becomes a criteria for decision making for investment. Any application of income is taxable, all governments are empowered to tax through Income Tax act. Good or bad, excess tax is another debate. Agree, higher tax takes out certain return percentage and ultimately your cash flow. Even increased GST will knock off your cash flow, do you spend sleepless nights for buying petrol if indirect tax is increased every time?
But there won’t be tax if there is no income. And your income depends on investment methodology and engagement with market. Where is tax as factor help in getting income? Are you including personal tax into investment document? At best it’s an item of personal financial planning. To me it’s simple, if you earn pay taxes as allowed by statute. I have 2 ways to pay taxes on share gains- either business income or capital gains. First is tax paid on NET INCOME (minus expenses allowed, marginal rate as per slab) and second on GROSS INCOME (flat structure, expenses not allowed). Play around with which is suitable subject to allowed regulations.
Other solution moves to another asset class with favourable tax treatment. But this is only applicable if you are good at both or multiple asset class. It’s the knowledge of asset class delivers returns not income tax. Or chose asset class which is risk free without any knowledge requirement which has a favourable tax treatment (I don’t’ know of any, fixed instruments are taxed at marginal slab rate.)
Let me raise an awkward question here. If income tax rates for individual (e.g. salary) increased to 60% will you stop working and open a restaurant as business income is taxed lower say 30%? Or you will find a way out to increase your income, be it bonus or something else.
I know I am bit isolated here with fractals (overlapped ideas of combined people). This remind me today morning conversation with someone. He shorted dozens Nifty contracts last week, I said why boss (aisa kya hogaya?). He said you don’t know HIGHER NUMBERS (NOT AMOUNT WISE) invest due to tax gains, any negative news will have distribution and serious! Bears will do will to take more plunge via television, newspapers by painting doom and gloom has arrived. The sell off could have happened due to many other factors as well!
Personal views, counter arguments are welcome.
Disclaimer- I am still not short on Nifty.