Indore: Long term capital gain to demoralise mid-size equity market investors, FIIs and HNIs

Indore: Union finance minister Arun Jaitley dare to re-impose Long Term Capital Gain (LTCG) after a gap of about 12 years on equity market investors, but it’s all sure to demo raise the mid-size investors, which are considered as a common investors. While reintroducing LTCG neither Security Transaction tax (STT) is scrapped nor it has been linked with indexation when movement of inflation in quite unpredictable.

Learned and senior most Supreme Court Council member Jaitley presented the full and final Union budget of Modi government amid high expectation of common men. Common men which are supposed to be a major support base of this government can think that his expectations are not being cared in the budget.

In the year 2005 then Union government scrapped LTCG and in lieu of that brought Security Transaction Tax (STT), which has to be paid on every sale and purchase of the equity (shares). Though, the rate of the STT is very nominal and aimed just to keep a tab on transaction of shares.

In the Union budget presented on February 1, Jaitley has proposed to introduce levy of LTCG at rate of 10% on the profit gained above Rs 1 lakh annually on sell of shares, which hold more than one year. Financial experts and common equity market investors feel that its re-introduction can’t be justified in the present scenario. If FM really wishes to introduce it in every manner, then he should have given relief to investors by scrapping the STT because it was brought in lieu of LTCG.

Despite that if the FM was adamant for its re-introduction, then he should have done its indexation and linked LTCG with inflation index so that the rise in inflation can be compensated, but this has also not been done.

According to financial experts, in fact this move will not affect micro investors of equity market, which are in very little numbers, but definitely demoralise mid-size investors, Foreign Institutional Investors (FII) and High Net worth Individuals (HNIs), especially, when movement of the inflation is quite unpredictable.

They are the investors, prefer to invest in equity market by avoiding to invest in gold and real estate, which are considered as the dead investment for economy, because these investment did not yield employment and help in building the economy. While, if company’s financial position goes strong, they plan for expansion, which ultimately help in generating the employment and boosting the economy.

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