LTCG Tax prompts experts to recommend high-return stock investments

Experts advocate stock investments for superior returns amid LTCG Tax

July 24, 2024

Taxation of capital gains has undergone significant streamlining

On Wednesday, Stock market experts said that investors should focus on buying stocks that can deliver superior returns after a marginal increase in long-term capital gains tax (LTCG) on equity becomes a reality.

The Union Budget 2024 has streamlined the taxation of capital gains, introducing only two holding periods: 12 months for listed securities and 24 months for all other securities, to determine short-term and long-term capital gains.

Thus, the holding period for bonds and debt mutual funds for being classified as long-term has been reduced from 36 months to 24 months.

According to market watchers, in the present context, FMCG stocks look attractive from the valuation perspective.

“It is important to understand that the Budget strengthens the India growth story with a focus on growth with financial stability,” according to experts.

The fiscal consolidation being attempted through the Budget is a big positive that should not be missed amid the concerns about an increase in capital gains tax.

Another important factor is that the removal of indexation benefits on gold and real estate will make equity a superior asset class, relatively. The concept of indexation has also gone away from mutual funds (MFs). Indexation adjusts the purchase price of an asset for inflation, reducing taxable profits and tax liabilities.

The higher tax on F&O trading is intended to discourage the excessive speculation in this segment and, therefore, is a welcome move, said experts. According to experts, the whole idea is to simplify the capital gains tax regime.

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