LTCG hike divides market mavens

Call for fair treatment of domestic and foreign investors; review retrospective tax implications

- SUNDAR SETHURAMAN & SAMIE MODAK

Market mavens are divided on the recent hike in long-term capital gains tax (LTCG) from 10 per cent to 12.5 per cent on equities. Some believe it will discourage long-term investing in stocks and enhance the appeal of other asset classes. Others argue that the rates are still lower compared to some global peers and will primarily affect the ultra-rich, who derive most of their gains from the capital markets.

"They have made long-term investing in equities less attractive and gold more appealing. While it's fair to adjust the shortterm capital gains tax, LTCG on equities should have remained the same, as this asset class supports capital formation. You want household savings to be used constructively. Although the impact may not be felt immediately due to strong market conditions, it could become telling in the coming years," said Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services.

Prashant Jain, founder and chief investment officer of 3P Investment Managers, supports the hike, arguing that the tax outgo on LTCG primarily affecting the very wealthy - is still lower than what a middle-class individual earning ₹20-30 lakh would pay.