Time to invest in stocks which can deliver superior returns: Experts on LTCG tax

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

According to experts, the taxation of capital gains has undergone significant streamlining in the Union Budget 2024 with respect to holding period and tax rates.

There will only be 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).

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.

Indexation adjusts the purchase price of an asset for inflation, reducing taxable profits and tax liabilities.

According to experts, the whole idea is to simplify the capital gains tax regime.