One of the biggest fears of equity investors has come true: Long term-capital gains (LTCG) tax on equities is back. Expectedly, the announcement made by the Finance Minister on 1 February 2018 rattled the stock market, sending the markets on a down ward spiral. The Sensex tanked by more than 1,000 points (as on 2 February 2018) since the announcement. Grandfathering of capital gains till 31 Jan 2018—LTCG earned up to this date won't be subject to tax—prevented the market from plummeting on Budget day, but it could not rein in the fall the day after.
"Market has accepted 10% tax on LTCG because of the grandfathering of gains till 31 Jan 2018. However, it will realise other negatives like continuation of STT, not providing indexation benefit to long-term equity investors, etc. later," predicted Dhiraj Relli, CEO, HDFC Securities on Budget day.
