Brilliantly written, I was worried for extending it to 3 years. It could have created madness in a place which is highly curvy apart from being non linear. Grandfathering is to prevent booking profit as not retrospective. They don’t have a choice, any law retrospective likely to struck down by courts. I wonder who were these guys booking profit in mid cap and small cap in last one or two week, perhaps in anticipation.
Now look at other side, the margin between long term and short term is shrunken to 5%. For most of retail investors 5% would boil down to few thousand rupees. This may prompt those people who use to hold for tax gains sell in advance. This is not one time, going to be recurring feature. This would increase STT further.
Secondly it’s not the money but compliance will go up. As it become taxable , taxmen will be more keen to find out missing capital gains!
Thirdly now you have a choice on transactions on or before 31st Jan. Practically you can save taxes if you opt for holding more than a year. It will provoke people to hold back than sell, because by selling anyway you have to pay STCG (either old or new regime).
Fourthly I assume (we need to see the fine print) carry forward rules stays same. In the case then obviously all losses under LTCG carried forward will be allowed to set off against LTCG.
Where I am stumped is indexation, how can be purchase cost same for 5 year old asset and 10 year old asset. Those who will hold for long term (10-15 years) eventually will pay same tax. The difference of value of money over time will knock out proportionate margin on ultimate sale.
