Budget 2018: Even as the date for Union Budget 2018 nears and amid talks that Finance Minister Arun Jaitley will look to tweak rules of capital gains tax, ace investor Porinju Veliyath says that there’s no rationale to believe that imposition of long-term capital gains will lead to a stock market correction. “I strongly believe the course of Indian equity investing in the markets will not change at all. If some change, says 10% tax is imposed on long-term capital gains, nobody will stop buying equity for that matter and nor will there be any crash in the market. There may be some effect for next 48 or 72 hours and volatility, but otherwise the market will not change its course of direction,” Porinju Veliyath told ET Now.
Last week, top banker Uday Kotak said that the centre should look to raise the holding period for gaining tax exemption on equities to two years, in the upcoming Union Budget 2018. “Maybe time has come to look at whether the one year period should be increased to two years. This means only after two years you would consider long term,” Uday Kotak, Executive Vice Chairman and MD of Kotak Mahindra Bank, told The Indian Express. Gains from equity holdings for short term (less than a year) are presently taxed at 15 per cent. The gains made from stock market transactions after one year are currently exempt.
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A few market voices had earlier pointed out that reintroduction of LTCG by Finance Minister Arun Jalitley in the Union Budget 2018 could lead to a stock market correction. “ The market also hopes that the LTCG on equities is not re-introduced. Tax free LTCG has been a key driver for investments in equities. However, an increase in the time limit for LTCG from 1 year to 3 years looks possible to foster a longer term approach to equities,” Angel Broking said in a recent note.
The equity benchmark indices scaled new peaks on Tuesday morning, tracking positive global and domestic cues. The 30-share barometer Sensex breached the 36,000 mark for the first time ever, and the broader 50-share Nifty raced past 11,000 this afternoon.
Sharing his views on the market going forward, Porinju Veliyath said, “I am not really surprised when Nifty touches 11,000 or maybe 12,000 after sometime. This is just the natural sequence of events happening in our country, something different, since we got independence 70 years ago. We are in a very different kind of growth orbit as an economy and as a nation.”