In his Union Budget 2018 speech, finance minister ArunJaitley revealed that the government was bringing back tax on long term capital gains made on equities, equity linked mutual funds or equity related business trusts. . The LTCG tax will be charged at 10 percent.
As a result of the announcement related to the LTCG tax in the budget, the markets reacted negatively with the benchmark Sensex falling more than 800 points as investors’ sentiments dampened and they rushed for selling their holdings.
According to a recent report despite the re-introduction of LTCG tax, the investments made in equity related mutual funds still remained profitable. As these instruments have the potential of doing far better than many other equity related saving schemes in the market, the report added.
the government says it was hopeful that the revenue on account of LTCG levy will grow substantially and hopes to double its revenue from LTCG tax on stocks to Rs 40,000 crore in 2019-20 as more share transactions come in its fold.
It may be noted that the LTCG tax has been imposed with a ‘grandfather’ clause that gives certain relaxation to the identified stock market investor. Under the norm or the grandfather rule, the government has said there will be no LTCG tax on equities held as of 31st January, 2018.
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