LTCG @ 10% Budget 2018 FY19

(bharat.jain) #41

Are we going to see selling for next two months as there will be LTCG from 1st April? Those who are holding for some time may want to sell and void paying tax. Lets say I already made a profit of 60 % on my portfolio and since sensex is already trading at peaks will it be prudent to sell now and avoid paying tax. Markets may not up at same rate now.

If such a selling does happen which sectors can it happen more.

(rahulshares) #42

Yes makes sense. Im planning to sell my long term holdings before April to avoid LTCG thereby saving 10%. And I can buy the same stocks again for long term with a buffer of price increase being less than 10%.

(Satya Prakash) #43

But then I think why FM mentioned 31st Jan when tax is going to get calculated from 1st April?

(bharat.jain) #44

That is to cushion the impact of LTCG otherwise if applicable on all then huge selling can be seen. Only on the price above 31st Jan 2018 it will be LTCG.

(Yogesh Sane) #45

No. Whether you sell now or 5 years from now, whatever LTCG you are sitting on until yesterday, will be exempt from LTCG tax. Only the LTCG from today is taxable. The grandfathering provision will avoid any immediate sell off.

(bharat.jain) #46

That doesnt sound intuitive. So does it means govt that set 31st Jan 2018 as the base date for calculating LTCG and that too when the equity markets are approaching peak PE cycles. This date cannot be forever for LTCG.

Or this date is only for investment already made?

(Left this forum) #47

Before the tax, investors had the luxury of switching from one stock to another every year. Now this will cost you 10% of your returns. Over time this cost will add up. This should make investors more disciplined and long term investing will truly be more rewarding. Stock flippers will lag long term investors.

No matter which school one is in good girls will do well and bad girls will do bad. Whether short or long term mathematics will win always (expectancy and average holding in together). Then it smack down to executing a plan with discipline, yes those with wings and flappers seeing too often in multiple quadrants will lose their shirts. But then that has been always the case.

From my limited experience in trading taxation has never been a consideration for holding, buying or selling. In my opinion a good trader is not affected by them.

(manjushree) #48

The following article deftly explains the implications of long term capital gains tax and is self explanatory. Hence I am not adding anything here.

(pkk123) #49

Only for existing investments. For new investments, any gains will be taxed so govt. really doesn’t care where markets go. In fact an alternate line of thinking is that now the difference between STCG and LTCG is only 5%, people may trade more and hence govt. gains more via STCG plus lot more STT because of higher volumes.


I did not see anywhere if long term losses can be set off against long term gains like we do for short term. As per the ET article gobvt is making a disticntion in STCG and LTCG treatment.

"2. Indexation of the cost of acquisition (determined as per above formula) will not be allowed. Setting off cost of transfer or improvement of the share/unit will also not be allowed. "

(pkk123) #51

How? Let’s say you had a share trading at 100 Rs on 31st Jan. If you sell it,

  1. If you buy it back for 110 on 1st April, you lose.
  2. If you buy it back for 100 on 1st April, you gain nothing.
  3. If you buy it back for 90 on 1st April, you gain.

But these scenarios are akin to predicting the market. There is no tax advantage to be had by doing this.

(Satya Prakash) #52

Actually saying that Short term trade will happen more is wrong.
Short term tax can be applied for any holding less than one year. So, you buy and gain then tax will be applied. Days can be any days less than one year. So, if I trade more then chance will be more of loosing. and if I gain then govt will deduct tax. Yes, I can set off from losses.
But if I go through long term then chance of loss is less and if I gain then govt will take 10%. Because long term is after one year then it is one time govt will charge 10% tax on gain. But short term can be big times. I can trade many times in a year so taxes will be 15% multiplied by that many times and not just 15%.

(vpbalu) #53

Also when you are selling and buying, you incur Brokerage and STT in both cases , so even if the price remains same, you will loose approx 1% of value.

(vpbalu) #54

It is too soon and bad to make long term investment decision on one budget proposal. What if the current government goes for an early election later this year and looses (However unlikely we may think them loosing the election), the next government reinstates no tax for LTCG early year when they will make they submit their budget.

(Gaurav Agarwal) #55

Do you think they can loose the election? They have lost all three seats in Rajasthan today, which is bit surprise to me.

(Nolan) #56

Dear @Yogesh_s, On the other hand, it can also be seen as one less incentive for speculators to hold for long term with just 5% difference separating STCG from LTCG.

(kvbsagar) #57

Thanks for nice example @Gaurav_Agarwal

(japree) #58

For this Long-term capital gains (LTCG) , is there additional educational cess of 4% ? So in total 10+4 = 14% for LTCG ?

(Gaurav Agarwal) #59

Nice article explains LTCG in details

(Yogesh Sane) #60

Dear @Nolan, very true. I was going to make that point as well just that I wouldn’t call it speculation but short term investing. There was a time when all I could find was marginally undervalued companies and I would compound short term gains of 10%-50% sometimes several times in a single year. All these small gains if compounded regularly add up to a sizable return even after paying higher short term tax.

However, that is a lot of hard work and not very enjoyable. If feels like a job. As if you stop working you are not going to earn. Only money compounds, knowledge does not. It is also difficult to build a concentrated portfolio of marginally attractive stocks.Sometimes price would shoot up 20% in a month and suddenly the stock becomes a sell candidate.

With a 0% LTCG tax, there was enough incentive for someone to research a stock that they are willing to hold for at least a year. That incentive and resulting research actually helps an investor to become a good stock picker over time. As you said, with just 5% difference now from 15% earlier, there is less incentive for holding a stock even for a year. If something looks marginally attractive, people will buy it without much research.