Should LTCG be abolished only for FIIs
Just saw a dumb article in ET, where the Financial Analyst is suggesting for abolishing of LTCG only for FIIs!
If there is any tax reform coming, it should be applicable for all market participants and should not differentiate between the market participants.
Retail participations in Equity Markets either through direct stock purchase or through Mutual Funds, is supporting market from huge corrections, then why should we create some tax law to benefit only Foreign Investors!
Abolishing LTCG/STCG would trigger huge market exodus from FII/HNI, as they might close their long standing positions, to move to, high growth markets, trapping retail investors even more.
FIIs are moving to other markets(South Korea, Taiwan, US) chasing high growth opportunities arising out of AI Boom and it is delivering results for them. Intel/Nvidia/Micron and other semiconductor bunch of stocks are delivering huge returns.
So, unless the opportunities dries up in other market and attractive opportunities(interms of valuation) are visible in Indian Stock Market, it would be difficult for FIIs to return.
With AI, our NITFY50 champions(IT) business models will change. They will not be able to bill the Customers for 100 employees, when the same task can now be completed with 10-15 specialized experienced employees.
So, what is the use of LTCG/STCG abolishing, when there will be no gains at all. Except for India loosing tax revenue, which might be used for any development purpose in India. In my opinion, Abolishing LTCG/STCG would open flood gates for FIIs/HNIs to exit Indian stock markets, as they are virtually adding 12.5% tax gain also a profit.
If I am given a chance to introduce the policy reform, I would introduce a new section VLTCG(Very Long Term Capital Gains-5 Year Equity holding) with 5% tax. Believe me, 0% tax any time, would be an option for Investors to get out of the markets, trapping the new Investors.