Dear Gaurav,
Can you clarify me the meaning of “Exceeding Rs 1 Lakh”. Does it mean that if the LTCG is 110000/-, then deducting Rs 100000/-, Tax will be applicable on Rs 10000/- only.
It is amazing to see the amount of time and energy spent to analyzing the LTCG ( not only in this forum but also across social media) and more importantly predicting behavior of the market (and hence by definition a heterogeneous group of individuals) because of this and also in fine tuning one’s returns by finding out where the incentive lies in choosing between a short term investing (isn’t it an oxymoron??!!) and long term investing.
First of all, no matter what, it is next to impossible to accurately predict the behavior of such a diverse group of individuals under various scenarios/circumstances.
Secondly, I feel that much better use of our energy is to focus on what we do the best as investors i.e. Understanding businesses, identifying good business models and management with good economics and buy it when valuations are on your side and price is below its intrinsic value. The amount of money that we can make over a period of time by focusing on basics of investing due to compounding effect will far outweigh the time/energy we spend in optimizing our returns to the T by trading in/out
I have yet to come across any great investors of past/present who has created significant wealth over years ever talking about tax arbitrage/optimization being the driving factor for buying/selling the businesses in the market.Hence, I feel best to focus on the business and valuation and ignore the noise around taxation part.
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Thats corrrect…Tax only on the incremental amount above Rs 1 lacs…So the tax implication on above would be 10% of R 10000 = Rs 1000
Two voluntary choices has been given to assessee:
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Below 1 year either you show completely as business income and stock in trade.
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Above 1 year you can show either capital gains or business income subject to consistency.
That leaves out if you do not want show business income for transactions less than 12 months.
- BTST/derivative/intyraday will be business income. No choice there.
- If you show as short term capital gains I do agree AO has a discretion. Volume, dividend payment etc has been parameters in past.
Anyway, I have used both varieties in assessment for my returns. Again consistency played a major role in assessment, beyond which not prudent for me to discuss here.
I understand your point though, people should be cautious before trading tonnes of shares for avoiding taxes. It is a dicey area indeed. Fantastic point, if you earn just see which is allowed easiest form of income and pay of taxes. That’s what I advocated earlier.
Thanks
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Why should it be one or the other? As in, understanding businesses and valuation is of course of utmost importance but so is understanding behavioural economics, macroeconomics and the like as it helps in developing mental models necessary to derive value and to understand volatility. Thinking and observing can never be a waste of time.
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Absolutely, spot on. This what I had to put a summary in earlier post.
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.
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The amount of money that we can make over a period of time by focusing on basics of investing due to compounding effect will far outweigh the time/energy we spend in optimizing our returns to the T by trading in/out
People have made tonnes of money by trading in and out. I believe every form of investing and trading works subject to one understand his engagement with market (methodology and execution) with good behavioral finance.
The bottom line boils down to what I am, what is suitable to me? How do I build capabilities, sustain and enhance them. This can be pure speculation as well. I am not suggesting anyone to be speculator or follow value/growth investing.
The end result is own metrics (financial, non-financial). It doesn’t change in all forms of investing i.e. pure mathematics.
(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.)@The_confused_consult
In hypothetical situation like this one may like to go to other countries for investment
That what I heard on TV from FII that they may invest in Singapore Nifty instead of India
Thanks
Ashit
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I am not saying choose one or the other! I perfectly understand the importance of mental models/behavioral economics- and by the way mental models need not be in realms of behavioral economics only, it can come from multiple disciplines - be int law of large numbers, critical mass, inflection point, base rate, social proof, slow contrast effect and many more. My limited point is, just trying to guess behavior of hetergoeneous group (for e.g. delta between STCG and LTCG being reduced from 15% to 5%, how it will affect the trading behaviour of investors) neither gives us any clue nor it gives us any edge as investor. In my opinion it is not only unknown…it is unknowable.
Having said that, I am willing to accept that I may be completely wrong here and will pay tuition fees in due course for my ignorance if that is the case 
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Very well said. If allowed I would give two likes !!
Cheers
There you go, another alternative. Invest outside Indian market subject to you should have command over the subject. Only tax considerations will not help investing outside. You have to make money in first place.
Of course FII can go anywhere, they are an institution. A barrage of people works right from research to execution to support systems (finance, tax). If one can grasp of all of this outside India brilliant step for them.
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I am not sure if the indexation benefit will ever come if the tax rate stays at 10% as it is consistent with how LTCG was taxed on Real Estate gains - 10% tax without indexation or 20% tax with indexation. The RE sellers were able to choose between the 2 options until the former option was abolished lately. Going by that trend, it is possible that the equities will also end up at the same place(20% with indexation) in the next few years.
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Why not? Why should there be different tax rules for different asset classes?
In next few years expect 1 lakh LTCG exemption also disappear.
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Here is what Finance Secretary Hasmukh Adhia has to say about taxing the gains in equities.
So we should expect higher taxes on equities sooner or later.
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This thread is more enriching than what we individually got through different media outlets 
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I think, buying back on the same day is an option. If the stock trades on both NSE and BSE, one could sell on NSE and buy it back on BSE on the same day and vice versa. This way, I think the delivery will happen. Anyone please correct me, if my above understanding is wrong
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As I was saying above, why should one asset class be preferred over another. Following the same logic, special treatment given to real estate should also go away. For ex. any gains from property, if invested back into real estate within 2-3 years of sale are tax free. Let this rule be applied to stocks as well. Why is selling a stock to buy another different from selling a house and buying another?
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Watch the video linked in one of the posts above. It answers your questions on selling and buying in quick succession.
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