Implications of long term capital gains tax proposed in Budget 2018

What should you do about the 10% long term capital gains tax proposed in Budget 2018?

In the budget 2018 finance minister Mr.Arun Jaitley has proposed long term capital gain on equity shares arising on such transactions exceeding Rs 1,00,000 will now be taxed at a flat rate of 10%. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.

So what should you do as an average investor? Should you change the way you invest?

At FinVizer we suggest that you should evaluate an investment option on its own merit instead of being driven mainly by tax implications. Taxation is important but can change with time. What this government has introduced the next can change. Even with a 10% long term capital gains tax, equities remain the most attractive asset class for long term wealth creation. So one should not change his asset allocation purely because of the 10% LTCG tax.

Some people are suggesting that ULIPS will not have LTCG. Should I invest in ULIPS to escape tax?

Beware of the people who suggest to invest in ULIPS to avoid this tax. ULIPS may give you short term relief but you may end up paying higher charges and commissions. Remember, there is no free lunch anywhere and if something is too good to be true, it probably is. Hunting for tax breaks alone is not a long term wealth creation strategy.

Conclusion

So overall FinVizer recommends that you stick to your original plan with minor adjustments for tax changes. Focus on the fundamental strength of your investments, than being driven by their ability to offer tax breaks.

To know more about investment options that suit your risk profile, talk to a qualified investment professional today. Visit FinVizer.com to talk to handpicked investment experts who can help you meet your financial goals.

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