LTCG @ 10% Budget 2018 FY19

(Growth_without Debt) #221

Want to know view on PMS service return after LTCG.

PMS charges huge fees and upfront commission from the profit we earned + now there will be LTCG tax on capital gains. Hence, if you take net return from PMS, it will be not better than Index Fund / Low cost good MF.
Also, due to increasing educated participates in market, market more likely efficient and difficult to beat in long-term. To get higher return from PMS, PMS shall beat Index fund more than (upfront commission on profit + base charges + LTCG tax) which is I think not much likely in many cases. This could reduce flow to PMS!


I hope that LTCG @ 10% will now discourage corporate buybacks at a premium that were rampant in last few months (after 10% dividend tax was introduced on income above Rs 10 Lacs). Corporate buybacks at a premium (instead of dividends) may have been tax efficient, but unfair to buy it-forget it, long-term investors. It also skewed the market-wide Dividend Yield metric, which (to me) was more useful than marketwide PE or PB.

(Roy) #223

Paying 10% LTCG still works out much better than paying 20% DDT plus 10% tax on dividend. Even for small shareholders for whom the 10% tax on dividend might not apply, the buyback route reduces total effective tax outgo by 50%.

Due to DDT, dividend is a very inefficient way of distributing profits back to shareholders. You could consider participating in these buybacks and simultaneously buying from the market the number of shares accepted in the buyback.

(abhishkjain2626) #224

I don’t understand why do companies here in India even pay dividends and then 20% of dividend amount goes to Govt. If they have surplus money, why not just purchase their own stock in small chunks from open market? Dividends could be great only If both LTCG and DDT were equal. Anyone please throw some light on Dividend taxation in other markets?


I already said that buybacks at premium were tax efficient…don’t deny it at all. DDT is the devil. But buybacks at premium increased only after 10% tax on dividend above Rs 10 Lacs was introduced (correct me if I am wrong).

The original intent of buybacks (at depressed stock prices, not at a premium) is to increase value for existing shareholders and dividends are for regular income. Here it got all mixed up due to tax treatment differences. For a retiree, dividend is easy income without any action required from his side.

I wish it was as easy as it sounds…I am conditioned to buying shares only when its undervalued or fairly valued.

(phreak) #226

Perhaps not the right thread but a few people had mentioned that LTCG might lead to migration of trade to foreign exchanges when stock futures list in SGX. Looks like the govt. wants to nip that in the bud. I guess this means an end to SGX Nifty as well?

(manivannan.g) #227

Yes, end of SGX Nifty, with a notice period. Though a good move, another knee jerk reaction on the cards ?

(Mahendra243) #228

Then good time to buy :slight_smile:

(Gaurav Agarwal) #229

STCG has been removed on trading in GIFT City… What does this mean?

(Praveen Ravindran) #230

Do NRI equity investors have to pay LTCG?

(Gaurav Agarwal) #231

Interview of MD Vikram Limaye of NSE

(Raj) #232

Yes, LTCG is applicable to NRIs also


(Mahendra243) #234

I think it can be a temporary…but after this i am getting lots of emails and SMS from major banks that ULIPS doesn’t involve LTCG but i think someone has to hold onto them for 3 years i think before redemption


every asset class has its own cycle so when real estate start moving once again money flow into equities will slow down. We need incremental money flow into equities for the existing investors to make decent money and pay LTCG. I read somewhere that STT collection is largely unchanged over the last 10 years. I am very sure that govt. will be left disappointed with its projected LTCG collection.

(Mohammed Rehan) #236

If there is Dual Taxation Treaty between India and the country where NRI is resident then I think NRI can save on LTCG and STCG if there is no LTCG and STCG in his country of tax residency. This needs to be checked and confirmed.

(Sumeet Shah) #237

ULIPs have other ancillary costs involved, including their service charges, which, if you sit and work out, will not be much cost effective, even if you were to buy a mutual fund for same period. I would always be more comfortable with a term insurance and mutual fund being separate. For those who have only a year or two view, the LTCG May be a dampener. But for those who have longer term views, with every rising year, if you see compounding of gains from mutual funds or stocks, the compounding of tax is lesser than Compounding of profits. See @phreakv6 post above. He’s explained it well with a few examples and quotes.

(SkyWalker) #238

I think that was always the case. Now indian bourses discontinuing licenses to foreign bourses, it is expected that those volumes will come to India, but that looks very difficult. Note that, withdrawing license doesn’t stop foreign bourses from trading indian Indices, also main challenge with india is slow and cumbersome legal processes.

(SkyWalker) #239

It might prove bad move in medium to longer term. Listing on foreign bourses helped india attract foreign money and offer visibility and credibility. With that cut off, indian sources are not that respected anymore. With current government changing formuals and world bank, Nobel laureates doubting indian numbers, it might create credibility issues which might prove difficult to counter.

(Raj Menon) #240

Can anyone clarify my doubt about new LTCG regulation? Most experts seems to be sayig that it is best to do nothing with regards to your holding as over the long term, the damage is minimal etc. But I don’t think this is the strategy to be adopted if I have interpreted the new law correctly
I have a stock A which I bought 3 years ago for Rs 80 or so. It had gone upto Rs 290 or so and now something like Rs 270. When I checked the stock price on Jan 31st, it was Rs 249. So If i sell before March 31st 2018, I have to pay nil tax. After April Ist, I will have to pay according to the stock price ruling at that point, over my defacto acquisition price of Rs 249. So it would seem that I have to definitely sell this one. But I have another stock B which also I am holding for more than a yaer and the price on Jan 31st was 1300 and now somethink like Rs 1100. In this case, I don’t have to sell as I can wait tiii it reaches the peak price. Am I right? It would have been better if the fair price was the highest price reached in the last year as most midcaps had fallen from the highs of early Jan as it approached the Budget. But that is nor the case right?