In its Budget for 2017-18, the Union government should avoid tinkering with the structure of the Long Term Capital Gains tax as it could spoil market sentiment, said CNBC-TV18’s Udayan Mukherjee.Expecting a "rocket" Budget, he said there is a possibility that the Budget will have elements that have not been seen in the past.
Mukherjee said the government would not fetch much gain through LTCG. Instead, he said the Centre should instead focus on fixing what it had broken when it did away with 86 percent of the currency in November: rural India.
Mukherjee said the government was no longer a major player in terms of galvanising the economy, so its main focus in the Budget should be on “not messing things up”.
‘’I don’t believe the government can revolutionise the economy by pumping in money,” he said.
The long-term capital gains tax on equities is currently zero for a holding period above one year, while short-term capital gains tax continues to be at 15 percent. However, with respect to other instruments such as debt mutual funds, the definition of holding period for computation of long-term capital gains tax has changed to three years, while for equities it has remained one year. Finance Minister Arun Jaitley earlier tried to dispel fears with respect to LTCG tax, but analysts see a good chance that the holding period of equities could be changed from one year to maybe two or three years.
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