The budget and Ltcg

The one provision in the Budget of 2018 which attracted my attention is the Long Term capital gains. I was also amused by the Rs. 40,000 standard deduction which is not of much use if you see the withdrawal of medical reimbursement, and travel. Sounds like a typical clerk in the South block – petty minded and stupid.

It is the equivalent of waking up a hungry sleeping man and telling him there is no food. Eeks Namo, it stinks.

Some baboo(n) is drafting these shitty proposals and getting them passed by AJ and Namo without making them understand how much it irritates the people. They had a chance to do somethings dramatic and radical in the budget. For example they could have given indexing on the Income tax threshold and rates. He could have made IT return redundant for people over 80 years of age. He could have made zero TDS for people giving a declaration if they are 65 years of age. No, he did nothing.

LTCG – Long term capital gains – which makes a return after 13 years is more a clerical pain than a revenue generator. In 1992/3 dividends were made taxable at source (it is not tax free as people say it is, DDT is a far more regressive tax – the small shareholder who may not have taxable income also pays it) at 21%. For a person earning say Rs 6L dividends BUT HAS NO OTHER INCOME, this 20% tax is very high. Technically if he is 80 years of age at his level of income he should have no income tax at all. Sorry, I am cribbing, but just telling you that DIVIDENDS are currently taxed at 20% and not NIL as some commies would like you to believe.

Then in 2004 STT was brought in and we were told that there would be a token STCG of 10% and LTCG would be NIL. Then slowly STT went up and stcg went up to 15% and now we have LTCG at 10% WITHOUT INDEXATION. I do not think many people have understood ‘without indexation’ – how much this will hurt a promoter who holds a share for say 40 years time alone will tell. The grandfathering date has to be changed regularly or indexing will have to be given.

I am expecting the following to happen on the floor of the house:

  • a proper clarification that shares acquired in an IPO, bonus, split, VC funding will all be eligible for Ltcg
  • FII eligible for Ltcg (as of now they are not, and that is stupid)
  • Indexation being given as a ‘sop’ to the people

Namo is nicely digging his own grave. Vasundhara Raje will surely lose Raj for BJP. MP is touch and go. Karnataka is likely to be with the Congress. With TDP not sure about supporting, Shiv Sena clearly against BJP in 2019, Navin Patnaik may not support, Kerala and Bengal of course not being with them, 272 looks tough, if not impossible.

By antagonizing the middle class (is it some IAS baboo(n) acting on behalf of PC and pulling wool over the eyes of namo?) is stupid. It is time he came out of his permanent Fancy dress and used his brain to see what is happening at the grass roots. The IAS officers who are saying nice things to him on his face may be busy pulling the carpet.

One lawyer wants to be the next PM or at least a powerful FM.

Any guesses who it is? No, it is not AJ, it is his guru.

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12 Responses to “The budget and Ltcg”

  1. IAS Baboo(n) is very witty 🙂

  2. Dear Subramoney
    A strong ‘wake up call’ on the budget. Very much needed. I am delighted to read that you now agree that something needs to be urgently done to stop the damage the rot could do in 2019. In our opinion – Gujarat election result was a wake up call but your article put the blame squarely on the media of making the win look like a loss. Yes, win it was – but with a signal of the approaching gloom. Best Regards.

  3. 1.Tax payers r only 3% right .. if somebody squeezes them, will the remaining 97% have some sadistic pleasure?.. will that fetch more votes!!
    2. I read a scroll “ we didn’t want to shock the markets with a high LTCGT.. Ultimately all LTCG will come in line”.. It seems 20% with indexation will b der in future

  4. For a long term equity investment (say Promoter holding for 40 years) isn’t 10% flat better than 20% with indexation assuming the equity returns are good. Yes it is better to have the option of having the both options. But my observation was as long as equity returns are more than 12-13% the 10% flat tax is always better than 20% with indexation as the govt declared values are 5-9% based on year. Indexation benefits only when real returns(return – inflation) are less.
    I did a calculation for my mutual funds, some of them with 10+year holding, and 10%tax is better option than 20% with indexation. Ofcourse 0% tax is the best option 🙂

  5. I just don’t understand why Babus & Netas in power (highest level) can’t understand some basics.

    For 20K Crores gain over a year, wiped off 5 L Crores of investors wealth in a day.

    Looks like they assumed Sensex returns are like FD. Other day I have read the news that they would target 40K crores next year.

  6. Guys, all of your really think LTCG is the reason for market fall and if there would have been no ltcg then market would have just gone up and up. Look at global cues.

  7. thanks, very well explained

  8. Narasimmamurthy on February 5th, 2018 at 8:54 pm

    When I was first told that difference between ‘regular’ and ‘direct’ schemes of mutual fund make a big impact over 15-20 years ,I didnt believe it. Doing the simple arithmetic was an eye opener.
    If a difference of 1% can make such a humongous difference ,imagine what the compunding effect of 10% will have ,if it is let loose on ,say, a retirement portfolio imagine the havoc it wreaks.
    This in a country which has poor pension cover.

  9. With the bankruptcy of ideas, they don’t know where they are heading and therefore any road will lead them there.

  10. This Aadhar update is utter nonsense.. It is definitely irritating people, what is the PSU banks officidom excellent customer service & response. Not just PSU, Airtel wants us to update Aadhar by (again) doing the thumb impression.

  11. Why was LTCG reintroduced without withdrawal of STT? Wasn’t STT introduced in leiu of abolishing LTCG and reducing STCG?
    This is why Indian’s have every right not only to be suspicious of Govts. as well as pay only the minimal tax due and manage their finances to avoid paying any and all excessive taxes than required.
    This is where Mr. Arun JebLootly is wrong, paying tax is not a Citizen’s duty, whereas collecting tax is Govt’s power and privilege.

    DeMo + GST + LTCG, 3 strikes. BJP you’re out!

  12. DeMo and GST is supposed to benefit the common man in the future, admittedly all are still waiting for that future, but LTCG without indexation and non removal of STT has already started hurting the common man and will continue to do so forever. Maybe because of the recent performance of the market the govt. has started thinking of capital gains as guaranteed FD returns.

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