A 0% short-term capital gains tax to pull in money into stock markets
Subsequent efforts by the regulator to try and encourage agents have been at best marginal and met with no success. Also, while insurers did see big collections from ULIPs in the initial years, that came to an end once the usurious commissions were cut. To be sure there was a fair amount of mis-selling, especially in ULIPs and to some extent in mutual funds, but at the end of the day households must be encouraged to put money in equities. While the MF and ULIP pieces need to be fixed, the government could give the markets a leg up by doing away with the capital gains tax on listed securities, currently at 15%.
The government collects some R3,000 crore from this levy which, while not an insignificant amount, isn’t very large either. A zero% short-term capital gains tax could pull investors back into the market, boosting the sentiment like little else can; given how one year can be a long time in such a dynamic world, investors would be comfortable knowing they can quit when they want to without being taxed for it. More participation in the markets will only make them more liquid. In short, a strong market will allow corporates to raise equity while not pressuring the fisc too much; the biggest beneficiary of this move will be the government since it’s hoping to raise a bunch of money from disinvestments.
If the markets rally—as they should now that corporate earnings
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