A Small Analysis of the effects of the levy of LTCG tax announced on the Budget 2018.

1. - Prakhar Jain

2. 10% Tax on LTCG from Equity
Exemption upto Rs. 1 lakh per year
No indexation benefit
Shares sold upto 31st March continue to remain
exempt
Gains upto 31st January Exempt (Grandfathered)

3. Earlier exemption  To boost investment
Today  Markets mature, steady inflows.
As of AY 17-18, Exempted capital gains =
₹3.67 lakh crore.
Reason:Widen tax base, while allowing
relief to small investors.

6. Major dampener for the investors.
Need to increase investment by
10-25% to get same returns, based
on the investment horizon.

7. Earlier, bond markets and other
investment avenues were ignored, as
their returns were taxable.
Now, they will witness more inflows due
to more parity.

8. India’s Tax to GDP Ratio has been
10.5% during the last 10 years.
Need to widen tax base.

9. Most large corporates nowadays had
prefered to directly invest in stock markets,
rather than in the real (manufacturing and
services) sector, due to greater returns.

10. Now, the difference between LTCG and
STCG tax rate is only 5%.
Decisions of selling would be more tax
neutral.
Also more volatility.

11. Will serve as a disincentive for the PENNY
STOCK SCAMS and similar money laundering
operations.
Many FPIs historically used the Mauritius
route for investing in Indian Equity. Now
ROUND TRIPPING OF FUNDS will become
useless.

12. Investors will have to fund their investments more.
Investment decisions will become more tax neutral.
Distortions in taxation have been reduced, and govt
has unlocked a treasure chest of tax revenue, while
not troubling the small investors.
A Detriment to penny stock scams, and disincentive
to round tripping of funds.

13. This can be regarded as
another one of the tough
decisions taken by the Modi
government, which will
definitely have a
NET POSITIVE IMPACT on the
economy in the long run.