#MoodMeter: Long-Term Capital Gains Tax – What Next?

Investment, Budget, Tax
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The Union Budget 2018-19 focuses on the agriculture and healthcare sectors, offers sops to senior citizens but seems to have fallen short of bringing any relief to the salaried individuals.

Coupled with this, the re-introduction of LTCG (Long-Term Capital Gains) on equity and units of equity based Mutual Funds has proved to be a dampener for the investing public.

We spoke to Financial Experts and Informed Citizens to decipher and possibly, tackle the LTCG effectively-

Investors can reduce these LTCG Tax losses if you understand what’s going on and make tactical changes to your investing approach. There are three ways of reducing this massive hidden impact of the capital gains tax:

Investors should not buy and sell frequently.

Investors can now invest in Mutual funds instead of buying and selling in equity directly.

As Rs. 1 Lakh of gains every year is tax free. Investor at the end of year could sell investments that would generate that much returns and immediately buy them again. It would save Rs. 10,000 a year.

Aditya Kabra, Bizbuild Business Services Private Limited: From February 1 onward, selling stocks or equity mutual funds that you have held for the long term will mean paying taxes on gains accrued since the market closing of January 31. If, in a year, you realise more than Rs 1 lakh of such gains, then 10.04% of that (including cess) has to be paid as tax.

After LTCG tax, holding equities will also get costlier now. “With STT and LTCG tax in place, the long-term cost of holding equities has gone up. From a personal finance perspective, the restoration of long-term capital gains tax on equity income is a huge change. This tax could cost you a lot more than 10%.

The markets witnessed a tremendous run during the last two years. On February 11, 2016, the Sensex stood at 22,951. Since then, it has gained nearly 13,000 points, translating into a gain of 56%. The Nifty has gained nearly 4,000 points or 57% from 6,976 since February 11, 2016. And foreign and domestic investors have played a significant role in supporting the indices. But things could change completely as the government imposed LTCG tax on equities.

Correspondingly, going forward, for businesses, working with accounting firms is going to be more important than ever before. Above all, you can learn more about some of the different services provided by accountants in your area by doing some research online. Moreover, researching a few of the different Accountants Melbourne has to offer might be a good place to start. The sooner that you can get your taxes in order, the better.

Pankaj Thadani, Financial Consultant: The introduction of LTCG is a disappointment especially since the Security Transaction Tax has not been withdrawn. The impact has been partially mitigated by grandfathering the capital gains until January 31, 2018.

In my opinion, the long- term direction of the markets will be more dependent on the considerations of global quantitative easing of money and flow of money rather than LTCG tax.

Pratik Jainabadkar, Chartered Accountant: As widely expected LTCG above Rs 1 lakh on equity investment will be taxed at 10%. However, despite above changes in budget equity, mutual fund remains the best option for long-term growth building. It is to be noted that above tax will be charged for gains of more than 1 lakh and hence is unlikely to impact small investors who invest in SIPs for the short or mid-term. This is because not only it will take small investors several years to create LTCG for more than 1 lakh, he would also pay small tax only on non-exempted gains. Thus, if you are a mutual fund investor, you are still using the best saving instrument there is and will continue to earn long-term returns better than most classes. The intro of LTCG should not change your long-term goals. If you are interested in starting a virtual bookkeeping business or an accounting firm, it is worth finding out as much as you can when it comes to dealing with taxes for clients.

Aiman Mehta, Entrepreneur: The greatest disappointment for me in the budget was the mutual funds. The mutual funds were being pushed saying that there will be no tax deducted on the withdrawal, but it now attracts a 10% tax which is a real dampener now. There is nothing really in the budget for the middle or the salaried class seeking no taxation relief.

Sanjay Joshi, Businessman: We have been investing for three decades now, and I think the government has cheated on us. When they abolished the taxation, the market went drastically up but since the announcement, you can see how the market rolled down. Also, I don’t think the decision will be rolled back just to prove the point that every decision is backed by in-depth research.


#All views expressed in this article are those of the individual respondents and Pune365 does not necessarily subscribe to them.

Loveleen Kaur

Loveleen Kaur

She loves travelling, dogs, sarcasm, humour and anything that spells F O O D, in that order. A writer on a journey to make positive stories a morning ritual and give society what it needs the most - optimism !!

Reach her at loveleen@pune365.com or tweet @KaurKaur18
Loveleen Kaur