In recent post, discussed on reverting the LTCG tax on long term investments. This post we will discuss an expected announcement of reverting LTCG tax on mutual funds investment which would make “Mutual funds investors happy:)” . In Budget 2018, with the withdrawal of Sec 10(38), there is a proposal of a parallel introduction of Section 112A to tax LTCG on sale of
a. Equity shares,
b. Units of equity oriented funds or
c. Units of business trusts
at a concessional rate of 10% on gains the gains in excess of Rs. 1 lakh without providing the benefits of indexation or the benefit of computation of capital gains in foreign currency in the case of non-residents.
Recently economic times published articles on LTCG benefit on equities to 2-3 years. It looks like government planning for complete withdrawal on LTCG for long term withdrawal. Here just want to highlight the points from the article.
“There could be two options: either a complete withdrawal of LTCG tax or increase in the threshold limit. Opting for either of these would revive sentiment of domestic and foreign institutional investors. FIIs pumped in more than Rs. 1 lakh crore into equities last year, making it the best infusion in the past six years. Any measure to ease the LTCG burden can go a long way in driving the growth of the domestic equity market,” said Rahul Jain, Head-Personal Wealth Advisory, Edelweiss.
Withdrawal of LTCG tax would attract more investors to mutual funds.
“Increase of the maximum deductible allowance under Section 80C from Rs 1.5 lakh to Rs 2 lakh (or even higher) is also a popular expectation that we think may play out in the upcoming budget. Both these moves will certainly boost capital market in the short to long term. The rumoured removal of LTCG tax, be it for a year or two, will spur domestic and foreign investment if implemented,”
Increase of deductible allowance from 1.5 Lakhs to 2 lakhs is long time expectation.
Withdrawal of LTCG tax would give good news for long term investor and it would attract more investor to mutual funds. Increasing deductible allowance would benefit salaried employees in section 80C. The other expectation from budget is that realignment of income slabs/tax rates and increase in deduction for interest paid on housing loans. Announcing all these would improve the spending capacity of people and improve economy.
Let us hope for best and increase the investment in mutual funds after budget 2020. In India, mutual is best investment even with LTCG tax. Continue investing in mutual funds for better returns. If finance minister announces withdrawal of LTCG, mutual funds would be great instrument for long term goals such as retirement, child’s education or child’s marriage.
People spending power impacts the indian economy.
Alignment of income tax rates and increase in deduction for interest paid on housing loans would improve the spending power of people. It would greatly help to improve economy. Let us wait for the best and continue the investment journey for better returns.