The stock market has become more volatile since the announcement of long-term capital gains (LTCG) in the 2018 budget. The main reason may not be the imposition of LTCG, but global volatility, which has increased over the past two weeks and contributed to increased volatility in India. market.
Such volatility has caused great concern among investors and they are not sure what to do with their investments, which will help them maximize their profits and minimize the tax burden. Although when making investments, the focus should be on making a profit, not on reducing the tax. One can reduce the impact of the tax, but it is not possible to abolish the tax after a certain increase in income.
We believe that you have nothing to worry about, at least for retail investors. This is due to the “grandfather” clause attached to this notice. According to which all your profits, accumulated until January 31, 2018, will remain tax-free. Then all gains up to the amount of Rs. 1 varnish will remain tax-free. This is for FY18, only winnings earned between February 1 and March 31 will be taxed.
If you have a large corps invested in mutual funds, say more than Rs. 1 kroner, then you may definitely have to pay some tax, even if your invested amount has increased by 1%.
From FY19 onwards, you must pay LTCG for all winnings in excess of Rs. 1 nail polish if you keep your investment for more than 12 months. For a shorter duration of holdings, you must pay a short-term capital gains tax of 15 percent.
We believe that this introduction to LTCG has a silver lining. First of all, it is not as bad as it is perceived by investors, especially for retail investors. Our calculation on the back of the envelope shows that you are only required to pay tax if you invest at least Rs. 60,000 every month and you earn at an average annual return of 12 percent. Although 12 percent has a realistic return, Rs. 60,000 is a very high amount for a retail investor.
In addition, if you continue to reserve a return on your investment after each year (no more than Rs. 1 varnish) and rebalance your portfolio to align with your investment goal, we do not see LTCG as a burden or depressing return on your investment. . Therefore, instead of waiting for a period in which your investment goal or a particular corpus for which you are investing matures, you should tactfully maintain a regular profit reserve and balance your portfolio and achieve your financial goal.
Have a nice investment!