Short term capital gains on listed equities hiked from 15% of 20%: How will it impact your investments? This change is intended to address the perceived benefit enjoyed by high net worth individuals. It is important for investors to consider the implications of this tax hike on their investment strategies
Now selling your equity investment before 12 months going to be more taxing than before as FM has announced that short term capital gains will be hiked from current 15% to 20%.
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"The rate for short-term capital gain under provisions of section 111A of the Act on STT paid equity shares, units of equity oriented mutual fund and unit of a business trust is proposed to be increased to 20% from the present rate of 15% as the present rate is too low and the benefit from such low rate is flowing largely to high net worth individuals. Other short-term capital gains shall continue to be taxed at applicable rate," said the budget memorandum.
"From the markets perspective the raising of STCG to 20% and LTCG to 12.5% is a body blow. We need to brace ourselves for a negative reaction in the short term. In the light of all the concerns raised about the hyper active interest in the F&O segment it is not surprising that the STT on F&O has been raised 5 times from 0.02% to 0.1%. Hopefully this will moderate the frenzy in this space," says Sanjay Sinha, Founder at Citrus Advisors.
"As regards capital gains, while there are measures which would result in simplification, there is an increase in tax rate for short term gains on certain financial assets which shall henceforth attract a tax rate of 20 per cent (earlier 15%), while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate. Long term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent. Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term. Unlisted bonds and debentures, debt mutual funds and market linked debentures, irrespective of holding period, however, will attract tax on capital gains at applicable rates," says Suresh Surana, a Chartered Accountant.
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This story originally appeared on: India Times - Author:Faqs of Insurances
