Prepare to pay tax on capital gains from next year if the government goes ahead with the Direct Taxes Code (DTC) in its current form. And more so if you are in the high income tax bracket.
Investors are worried as the final discussion paper of the DTC released on Tuesday has gone ahead with the plan to tax long-term capital gains - now exempt - garnered by individuals from shares held for more than a year.
Also, the code means that both short-term capital gains (currently taxed at 10 per cent) as well as long-term capital gains will be added to your regular income and taxed at the highest rate applicable on that basis. For high net-worth individuals, that means being taxed at the highest 30 per cent bracket.
A wealth advisor told HT he had received several enquiries from high net-worth clients on what they should do.
While the government has proposed that there will be some deductions available on long term capital gains tax, experts are still waiting for the clarity on what the deductions will be.
"This will certainly affect the markets in a big way and people at large - both individuals and corporates will get impacted by this. And if the provision remains as it is then before March we will see huge sales," said Hemal Zobalia, executive director, KPMG.
Experts say it might make sense to churn your portfolio in such a case.
"If you are holding a stock for several years it makes sense to sell it this year and retake the position next year so that whatever gains are there get booked without tax," said Aseem Dhru, CEO, HDFC Securities.