I always thought india is the most repressive place for retail investors vis a vis FIIs - FII or FPI pays no tax on both stcg and ltcg in india if he is operating from a dtaa treaty country - the trend is to operate from dubai or singapore which do not tax capital gains at all - I think they must abolish STCG@15% also and replace with STT so that systemic solution is available where no such frauds need to be done in the first place
After the thoughtless, bureaucracy (Crazy!) driven imposition of 3 year limit for LTCG in debt from this year by the FM , I won’t be surprised with anything. This 3 year move almost has wiped out an entire asset class - namely FMP and thousands of retirees who put in their money as safe had to shell out their hard earned money in tax In this country, the only way to save became equity and that is too under the scanner. It is worse than an oppressive regime !
Well, all governments are running deficits and in perpetual need of more and more money. Hence, I feel it is only a matter of time when they eye long term capital gains. I am not saying whether this is right or wrong, but, just stating the reason why LTCG tax is likely sooner than later. I believe it will be more useful to focus on what is most likely to happen rather than argue on what “should” happen. To me, tax on LTCG is inevitable. Best is to learn to live with that and orient ourselves for minimizing portfolio turnover by focusing on buying stocks with longer term focus.
I feel Govt should impose 10 percent tax on LT Gains.On one hand we shout for removing subsidies,but cry if it applies to us.Well many would say we are already paying STT,but that is very less compare to LT Gains made .May be they can allow to give you credit for STT paid on LT Gains deals.I don’t know how far it is feasible ,but thats not a big deal.Just think of it ,Deals of thousands of crores went without paying any LT Gains(like that of piramals etc).Further nobody will run away to real estate or gold for investment ,if LTG applies on shares ,as it applies on those illiquid investments also.
Reading this news for the first time here…That would be ridiculous. Think of mutual funds and not just direct equities. In addition to other charges, the expense ratio’s of most of the AMCs are already in the range of 2.5% - 3% much higher when compared to most of the other countries. A retail guy would think thousand times before going for equity.
I have a feeling that things are moving in the direction of levying tax on LTCG in equities and equity MFs. It will be death knell since the expectation setting will have a huge mismatch and this will result in market tank seriously.
Here is some latest news, coming out of the Delhi bot boiler
All asset classes except equities have ltcg tax. Most countries tax ltcg on equities.
There was a flaw in the system where only equity investors didn’t have to pay any tax on long term gain no matter how much money they made.
This was not fair for other asset classes.
Hope that tomorrow budget removes this arbitrage!
This is not at all arbitrage. By investing in companies we are being part of companies and the companies already pay taxes on earnings so eventually we are paying taxes on our share. If we would be taxed additional on LTCG then we are paying double tax.
Lets say if LTCG tax is introduced can there be a carnage for short term? Would it be better to sell of everything now and buy again at more lower levels? Would this have serious impact on market or it would be a noise like greek crisis event?
Tax on LTCG is a welcome move. If we want govt to implement JAM and check the leakages in burgeoning subsidies, the first sacrifice should be from investors. If market reacts with panic, it may break down into the last leg of this bear market.
Long term investors may be left with a breather, as govt may not tax investments held beyond three years. If tax is imposed irrespective of holding period, it will be a mayhem.
If the LTCG is not announced till 9:15 am would it be smart to sell off holdings and in case news about tax is announced later you will get to buy again cheap. If the news is not announced around 3:15pm then buy again suffering just the intraday brokrage charges plus minus small stock price movement?
(Sorry, don’t take my reply as arrogance, it may just help someone’s thought process.)
This is not investing, this is speculation!
The point here is not if you will get it right or wrong but the thought process. If this is the final decision before you go for retirement then it might makes sense to take an educated guess and act on it with sensible allocation but if you are in equities for the long haul, give more importance to the process and sticking consistently to it.
If you were to act on such news, you will have many instances such as these in your journey and if you were to act in the same way then the chances are you will be wrong more often than right even if you get the tomorrow’s decision right. Now, tomorrow’s decision might save you X INR and if you continued doing this and one day in future once you have accumulated big money, if you act on some rumours on this big amount and get it wrong the impact would be 10X INR or may wipe you out.
Also, how sure are you that the LTCG is already built into the current nifty levels or not? The media has been going bonkers on this news from past 2 weeks based on some comment by Modiji in some speech so market is fully aware of this. Prime Ministers do not give hints before budget :-). Even if he were to give hints, he would choose to give a significant hint not such a hint on such small impact decision!
Also, even if this LTCG were to come into force, this will not have any impact on the underlying business fundamentals of any company barring may be some holding companies or companies which have valuations of their stock holdings built into it.
If you have analysed the macro environment and based on your analysis you feel markets are bound to go down greatly from these levels due to X, Y, Z reasons, then you may choose to act accordingly but not on this rumour please - at least I would not!
Surveys conducted by one of the business news channels predicted that NIFTY could drop by 500 points if any kind of tax on LTCG is announced. While details are yet to be known and these are more of rumors at the moment. But it would be good to wait and watch and for long term investors that should provide an entry into some good scripts. The next question - Is that going to be the last leg of this bear market?