Why Long-Term Investing Makes Sense

FINANCE minister Nirmala Sitharaman's record seventh budget has underscored the importance of an efficient tax system with an all-rounded budget.

- RAJAS KELKAR

The reaction in the stock market was initial panic when she mentioned the word 'capital gains’. However, equity prices recovered quickly to end the flat trading session on Budget Day.

As an individual taxpayer, you are not paying any significant tax up to ₹15 lakh income annually. That means you have some more money in your hands. Your long-term financial plan will not be affected if you are a regular investor. There is a minor increase in the long-term capital gains tax in listed shares. However, if you are a day trader in equities and derivatives and earn well, you have to pay more taxes on capital gains.

The Budget clearly states that you must pay taxes if you make money through capital gains. Capital gains in India are here to stay, and if some pundits are believed, they will eventually be brought in line with the rate in rich countries. At 12.5%, the long-term capital gains tax rate is still lower than that in the United States at 20%. So, you may want to set your expectations accordingly.

Trading V Investing profits

The tax system in India encourages you to invest more than trade in the equity markets.