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A 10% tax on long term capital gains has been proposed by the budget. This tax is an attempt to create a level playing field.
Professionals, salary earners and Business people pay a tax on their income which is as high as 34%. On the other hand, large net worth individuals pay nothing on their profits derived from shares.
This strange tax system resulted in hard work being penalized.
The government has taken a step forward by bringing long term gains into the tax system although even now some exemptions have been offered. Well, it is a first step towards tax equality.
Will the stock markets get angry at their fat cats being asked to pay tax ?
I have two points:
First, if an act is good for the country, then the government of the day should take the step, not worrying about stock market reaction.
Second, the stock market always reacts positively to action that is good for the country. So, there may be a minor, short term reaction. But, markets are wise. They will react positively to this sensible act.
Conclusion: The stock market will not react adversely to capital gains tax. Markets will move on momentum, funds flow, international cues and so on. Which means, it will be business as usual.
Darn day holding on to the 11200 nifty call. Got smacked 🙁
1. The proposed 10% tax on profit exceeding more than 1 lakh from sale of shares is a very positive and welcome step from the government. We must always remember the story of “A Hen That Laid Golden Egg”. Our country will grow if we have a robust economy. Voluntary taxpayers will always be happy. Non taxpayers will cry for some time. They have no choice but to get used to the new system.
2. Let’s keep investing regardless. Goodluck to all members of s2analytics. Regards.