'Budget ki debate mein': What Vijay Kedia, Samir Arora, Deepak Shenoy, Shyam Sekhar, Aveek Mitra, others say

Union Budget 2024: The increase in short- and long-term capital gains taxes, in addition to increase in security transaction tax (STT) on futures and options trades, triggered a debate in the stock market over whether such hikes were reasonable. 

A Sebi study suggesting seven out of 10 individual intraday traders losing in equity cash segment in FY23 and a previous study by the regulator suggesting nine out of 10 F&O traders making losses, do make a point for higher STT and STCG rate hikes, which could curb speculation in the market. 

Where the debate gets heated is the LTCG, which has been raised to 12.5 per cent from 10 per cent earlier. While some analysts believe it was unreasonable, others felt it was done solely to simplify tax structure across asset classes. 

Deepak Shenoy, Founder & CEO, Capitalmind said there was some disappointment in the increase in capital gains tax rates for equities, but there is equalisation of rates across asset classes, which brings a sense of clarity. He rated the Budget seven out of 10. 

Delhi-based investor and founder at Aveksat Financial Advisory, Aveek Mitra, was critical of the LTCG tax rate hike. 

"Those fund managers coming on media or commenting philosophically on social media about unimportance or insignificance of this increase in LTCG are possibly less of an investor and more of a salaried fund manager (don't invest own money) or salesman of some schemes or Advisory or PMS or AIF who earn commission income," he posted on X. 

He added: "For them, if its made 30 per cent too then also won't affect much because it's common knowledge (which is true too) that among all asset class, stock investment done rightly is most rewarding and can change one's life. But it's no argument to increase the LTCG for riskiest of all asset class."

Shyam Sekhar, founder of ithought Financial Consulting in a post on X said when LTCG was removed in 2004, he along with an ace investor whom he holds in very high esteem, felt the tax rate in the country was already unfairly low. 

"We discussed LTCG again yesterday. We felt that the rate was reasonable. But we also expected a lot of cribbing and complaining. Basically, investors want to earn big and pay low taxes," he said.

Samir Arora of Helios Capital, without naming anyone, in a post on X, said one should learn from the cigarette makers, who have been able to convince the government that there is elasticity of demand -- increasing taxes beyond a point will lead to fall in tax collections. 

"I guess stock market has become a bigger addiction, so fund managers and brokers say no problem to any tax of any kind," he posted adding: "All fund managers and brokers I saw on TV said that the tax is not a problem, so who will protest."

In 2004, STT replaced the long-term capital gains (LTCG) tax. But the Budget 2018 brought back LTCG at a rate of 10 per cent on annual gains of over Rs 1 lakh. STT was not removed. Now the government has revised the STT, STCG as well as LTCG. The exemption limit for capital gains though has been raised to Rs 1.25 lakh.  

Nations such as Mauritius, Singapore and Oman do not impose capital goods taxes, such taxes in the US are levied based on overall taxable income. They are either nil, 15 per cent or 20 per cent. The headline highest statutory rate, thus, stands at 20 per cent. 

In Brazil, gains are subject to progressive income tax rates, which range from 15 per cent for capital gains that does not exceed 5 million Brazilian Real to 22.5 per cent for the portion of the gain that exceeds 30 million Brazilian Real, as per data compiled with PwC.  In Japan, as per PwC, gains arising from sale of stocks are taxed at a total rate of 20.315 per cent (15.315 per cent for national tax purposes and 5 per cent local tax).

In China, capital gains derived from share sale in the secondary market are exempted but a 20 per cent capital gains tax is levied on other assets, say real estate.

In Australia, capital gains are subject to the normal personal income tax rate. There is a capital gains tax discount of 50 per cent for Australian resident individuals who own an asset for 12 months or more. It means if taxes are held for over 12 months, taxes are levied only on half of the capital gains.   

Meanwhile ace investor Vijay Kedia has a piece of advice for investors: "Budget ki debate mein, time na barbaad kar, Nayi story dhoondh, life ko abaad kar."