LTCG @ 10% Budget 2018 FY19

(Jaclyn) #81

Agreed. That is why I never commented on that subject. Rather than ignoring him in total, I picked-up the most relevant point which I felt makes sense to me, at least.

Quote: A mutual fund investor can get the same returns but needs to buy and sell much less frequently. The trading is done inside the fund’s portfolio by the fund manager. However, as long as the investor holds on to the fund, there is no taxable event.

I think he has the assumption that they sells of a fund manager doesn’t attract LTCG, but only in the hands of the investor it is applied. Again we have to wait for the clarity to come through from the government. Let us wait.

(pkk123) #82

Whatever happens for STCG today should be similar.

(Pradeep Kumar Arora) #83

Why sell. Your 60% return is protected because your cost of acquisition is grandfathered to the highest price on 31 Jan (when the market was on a high). If you sell now or later, it will be the same

(rahulshares) #84

Do mutual funds themselves pay STCG taxes currently and deduct the same from NAV?
I believe whatever is the position for STCG, similar would be position for LTCG too.

I may be wrong, but I believe MF’s should be exempted from LTCG taxation as it is pass-through and investors will be subjected to double taxation - as MF’s will incur STCG/LTCG tax when they churn portfolio and tax shall be deducted from NAV therefore indirectly tax being borne by investors. And secondly, when investors redeem their mutual fund investments, will again be subjected to STCG and LTCG tax.I guess the article here assumes MF’s will not be levied LTCG/STCG when they churn their portfolio and seems logical to me.

Can anybody here clarify what is the current provision for STCG?

(hamed) #85

This tax will hurt common man more than investors…poor middle class person religiously does sip and saves for retirement where he knows he will need money for his medical and other expenses…and Jaitleyji happily taxes him 10% on it…

should have extended LTCG period from 1 to 3 years with 0% tax thereafter. Investors would have paid up and common man who does sip would have saved. totally agree with some of the sentiments here corporate tax…dividend distribution tax, STT, LTCG and MF dividend…he is really screwed up entire term by constantly taxing high mostly to middleclass folks.


Please check the below video where various scenarios for LTCG are provided.

(Roy) #87

Investing = capital gains
Trading = business income
BTST and swing trading, especially if the number of such trades in a year are high and volume significant, will be categorized as business income and not capital gains and will hence be taxed at slab rate.

(Roy) #88

No, due to pass through status, they are exempted from capital gains tax on sale of their holdings.

(BGattu) #89

For small retail investors, I think 10% LTCG with 1L profit exemption is not that bad if the investments are not too high.

One can book profits annually and don’t pay any tax if the profit is < 1L. They can book loss as well to offset future gains. So far, the tendency of the small investors to losses is to wait patiently till the investment recovered. Now a LT loss in some stocks can be booked to offset the gains in other stocks.

A small investor can spread the investment within the family (say 4 people) can avail 4L LTCG tax free. This game can be played year after year… I think this LTCG is far better option than increasing holding period to 2-3 yrs.

Senior boarders can correct me if I am wrong.

(manojkgarg) #90

i have invested 50000 in an equity mutual fund (growth) in 2006, and its value on jan 31 is 300000. if i sell it on 31st march what would be the LTCG ? and what if i sell on April 10 ?

(Mayank Narula) #91

No there won’t be if you sell on 31st March and it is applicable 1st April onwards.

(cooljeba) #92

small investor will have to pay tax when he touches his retirement kitty or his savings for high expense like daughter marriage or kids school expense etc.
When he sells his equity in bulk he will have to pay LTCG of 10% for Capital gain above 1lakhs

(The Confused Consultant) #93

It’s always better to consult a tax practitioner when it comes to tax incidence. Saying that:

It’s not straight forward that investing is capital gains or trading is equal to business income It was dicey area till a circular came last year from CBDT. See some comments under my previous identification.

6/2016 makes it clear now if you want to classify business income you can continue but can’t change again and again. Same if you classify as capital gains. These are stocks for delivery based transactions.

But please note below:

Intraday profit and loss is considered as speculative loss and clubbed under business income. If you have loss you can carry forward for next 4 years. This comes from the premise the asset is not transferred in terms of ownership as demat number didn’t change. You can club BTST here as well.

Profit from derivative is not considered as speculative.But ultimately profit and loss goes and sit in business income.

This is my understanding based on last year assessment. I am not a practicing CA.

(pkk123) #94

What Jet Li has done seems a bit rushed for now but I am sure indexation benefit will come sooner or later so don’t worry about retirement kitty etc for now. When that time comes, I am sure things will look better by then.

(maheshkumar) #95

Valuations will come back to 31st Jan level soon as there is no tax upto 31st Jan value
Now most of the stocks are trading below 31st Jan level

(Capsule91) #96

This is a misinformed article written…
Mfs ,when they churn their portfolio dont sell out everything at one time, by reduces them systematically as and when required… So they will also be subjected to taxation and the tax will be paid from the returns they make… the net return then will trickle down the investors and when they redeem, they are going to pay the income tax… so there is actually tripple taxation in mf…one the stock comany is paying, 2nd the mfs, 3rd the investor…and in dividend plan, quadruple taxation…

(pkk123) #97

How? Equity MFs give dividend by selling units. In SWP, the sale of units will be done by individual. Both are taxed at 10% now so what’s the difference? In fact having put 10% LTCG, keeping the dividend free would seem stupid when it’s essentially the same transaction. In fact if someone got dividend having invested less than one year ago after 10% tax, its still better than paying 15% he would have paid as STCG.


A lot of retail portfolios of about 5 lakh value in investments are going to see yearly churn to avail LTCG benefit of 1 lakh, assuming an average return of 20% on the 5 lakh in a year. This money would again be probably reinvested on the same day/week/month. If its invested in the same stocks, I assume they should allow for the scrips to be delivered from their demat accounts before they buy it back - So perhaps buying back on the same day is not an option, I am not sure. This is from a micro-economic perspective.

From a macro-economic perspective, the P/E that a potential new investor will pay would have come down now considering the new tax implication. After all equity is not like tobacco that can command demand at any amount of margins and sin-tax at will. This should re-rate pretty much all stocks. What we saw today is one such.

Next two months will be tricky as the upside is capped at Jan 31st highs for pretty much all stocks. When upsides are capped, people are in general unwilling to buy. This is why some people exit stocks stuck in yearly circuits even if they are splendid businesses. The reason why I think upsides are capped is because of the sell and buyback incentive caused by the LTCG which applies differently until 31st of March.

Buying closer to 31st March would mean that LTCG will apply closer to 31st March in the next year which restricts the number of days available to sell at good price. The more days you have to choose when to sell and buyback, the better. I presume all these calculations have gone into what happened today. This money is bound to come back sooner than later and more people will follow this strategy which could cause volatility like today next week as well but overall we could just be going sideways with the top at 31st Jan and bottom probably at today’s lows or whatever fresh lows are made next week.

It is quite a curious situation and observing it from a micro and macro perspective is going to be very interesting.

(Roy) #99

The Tax department through that circular, has given the taxpayer the option to choose between business income and capital gains, only when the period of holding crosses 12 months. For short term capital gains, the AO based on his interpretation/discretion, still has the ability to claim that the income is business income and not short term capital gains.

Here is the relevant part from the circular
b) In respect of listed shares and securities held for a period of more than 12 months
immediately preceding the date of its transfer, if the assessee desires to treat the
income arising from the transfer thereof as Capital Gain, the same shall not be put
to dispute by the Assessing Officer. However, this stand, once taken by the
assessee in a particular Assessment Year, shall remain applicable in subsequent
Assessment Years also and the taxpayers shall not be allowed to adopt a
different/contrary stand in this regard in subsequent years;
c) In all other cases, the nature of transaction (i.e. whether the same is in the nature
of capital gain or business income) shall continue to be decided keeping in view the
aforesaid Circulars issued by the CBDT.

(Mahendra243) #100

that was well wrriten…but what i understand from you is…stay put in your stocks?
is that the message you want to deliver?

Also with selling and buying aren’t we giving more money to govt in form of more STT :grinning:?