Since the Union Budget was presented on February 1, 2018, there have been lots of reactions initially, and then discussions on how to optimise the impact of long-term capital gains tax (LTCG) like SWP / booking profits up to LTCG of Rs 1 lakh per financial year. Now let us look at the worst case: you have crossed the threshold of `1 lakh and now you have to pay LTCG tax. What is the impact on returns?
We will discuss that now, but it is nothing to deter you from investing in equities.
The impact
The proper way to look at returns is compounded annualised growth rate (CAGR). The longer the time period, on a CAGR basis, the impact of tax on your returns comes down, due to the compounding effect. Let us look at a few examples.
