“In this world, nothing can be said to be certain, except Death and Taxes” – Benjamin Franklin

Sensex lost nearly 850 points yesterday. Lot of blame is being awarded to Mr. Jaitley’s budget announcement for ending the free lunch in equity markets. Beginning 1st Feb 2018, all future equity gains are to be taxed at 10%.

The term ‘LTCG’ was hitherto unknown to nearly half the investing community that has been recently brought in hoards into the market via SIPs and Penny Stock trades. Only after reading today’s special budget edition newspapers, they have discovered that the equity gains were actually tax free if held for more than 1 year. All this while, they were investing without any knowledge about the extreme tax advantage in equity assets.

But now, there is a panic!

– “What will happen to our investments now?”
– “Isn’t the equity now an unattractive investment?”
– “Isn’t it time to pull out the money, as there is no point paying taxes to the government?”
– Here is an amazing one: “With higher gains in equity, we will end up paying larger tax amounts. Why pay more taxes?”
– Lastly, “We have never shown capital gains in our IT returns in the past. Perhaps now we will be compelled to?”

Well, I will not get into questioning the logic of taxation. Any tax hike is generally unpleasant, especially when we are not in a situation to know the fiscal efficiency of our government.

Coming back to the topic of Equity investments, it is a fact that every investor invest in equities for its potential to deliver higher returns. By higher, I mean to say, higher than any other asset class.
Secondly, despite the new tax, it still continues to be the least taxed investment. You can compare it to Real Estate, Gold and Fixed Deposits.

Net of taxes, Equities shall continue to the best asset class. Investors should take the tax hike in their stride and move on with their investment plans.  


By Sameer Rastogi

18 years of experience, PG in Finance and has delivered Wealth Management lectures at IIM Lucknow, IBS Gurgaon and IIPM Delhi. Contributed to various newspapers. Strength – Application of Economic fundamentals to Investment

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