LTCG tax on mutual fund investments differs from one fund type to another—both the definition of the period that qualifies as long term as well as the tax rate that applies. Photo: iStock
LTCG tax on mutual fund investments differs from one fund type to another—both the definition of the period that qualifies as long term as well as the tax rate that applies. Photo: iStock

Election results 2019: Many hope NDA-II to roll back LTCG tax on equity

  • Sensex also hit 40,000 for the first time as the early leads suggested a clear BJP victory
  • The new government should definitely work something out in terms of taxation and remove the 10% LTCG tax, says financial advisor

With clear trend suggesting the NDA-II forming the government, many hope that the government will review the unpopular long term capital gains tax on equity that it introduced in Budget 2018. Long term capital gains of over 1 lakh in a financial year are taxable at a flat rate of 10%.

“The new government should definitely work something out in terms of taxation and remove the 10% LTCG tax. You are not giving that bonus or appreciation to someone who is investing into the growth of the country," said Alpana Singh (40), a Lucknow-based mutual fund distributor and financial advisor.

29-year-old Gautam Nimesh, a software developer with SAP Labs in Bangalore echoes the sentiment. “Tax on LTCG is one of the negative things that the government had in its last term and I feel they should remove it," he said.

But with the BJP getting a clear majority, and a stable government in place, people are hopeful that their investments will grow in the future. “With a stable government in place, new policies will also come in, which will further boost the industries and economy, and in turn improve the investments," said Nimesh. Singh, who has 95% of her assets in equity, also feels her investments will get better because of a stable government in place. “The new government will certainly look at key issue resolution like ease of doing business, and they are looking to grow and bring inflation also down. I am a very aggressive investor; so the sentiment right now is extremely positive and I see a stable government coming in as a very positive thing," said Singh.

Sensex also hit 40,000 for the first time as the early leads suggested a clear BJP victory. However, many want to wait and watch to see how the election rally settled. Bangalore-based Harshit Dravid (32), senior manager-business development at Flipkart, who belongs to Prime Minister Narendra Modi’s constituency Varanasi said that he will not go by the current market rally euphoria and wait and see what new policies the government makes before making any new investments. “If I talk about the stock decisions, it will mostly be in large-caps. Keeping the election euphoria aside, I will actually wait for some actual reforms and some signals at the sector-level to come in before I choose my small-cap and mid-cap stocks. This euphoria and market rally may be short-lived if structural reforms are not brought in place. Without having a fundamental confidence in place or any healthy indicators of growth, I won’t go by euphoria and stick to my large-cap picks," said Dravid.

The government’s inability at creating jobs is also one of the things that people hope the government will prioritize. “Government also knows its weak points right now and jobs have been one of them. So whatever they have missed in the last five years, they should definitely look at improving on that front now," said Nimesh. Dravid also hopes the BJP government, who is coming back to power, in its second terms makes job creation a priority. “I hope the top-most priority of the government is to create more jobs. After the GST and demonetization shock, I hope the small and mid-level companies should pick up now. If the government looks at improving the stability of these companies, jobs should a result of that. Hopefully creating more government jobs should also help," said Dravid.

While the equity market performance is a hit now, many don’t expect much appreciation in real estate despite whatever government comes in. “The builders who are coming up with luxurious housing projects, I don’t expect them do well. Though there is focus on affordable housing from the government, I will stay away from it overall," said Singh. Dravid said that if at all he has to look at real estate investments, he would probably invest in his hometown in Varanasi as there is some price appreciation there. “As far as metro cities are concerned, I would probably stay away as there could probably be a correction also as there is lot of unsold inventory. So i would stay away from investing in real estate in metro cities," said Dravid.

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