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BW Businessworld

Looking At Conventional Tax Slabs In Budget

'Increase in the tax slabs will be very counterproductive to what the government wants. But increasing long term gains tax for equity as an asset class from 1 year to 3 years, will only help the investors family'

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From taxing the equity profits to changing the definition of a long-term investment altogether, the Budget 2017 is not going to be a regular budget.

BW Businessworld in association with NewsX on Tuesday brought together industry experts to share their views in a roundtable discussion on the personal finance segment of the forthcoming budget.

Sharad Mohan of Calibre Investments said: "I expect some tinkering in the tax structure. I am not looking at the tax slabs but what the government could do is increase the rate of the securities transaction tax. STT is a very efficient and cost-effective way of collecting the tax right at the source."

"We want government to help us manage the emotions and the behaviour of the investors. Investors generally stay invested in the equity as an asset class for 1.78 years on an average. When we are talking of 10-year goals, then the long-term capital gains tax definition going up from 1 year to 5 years will be a good move," said Sunil Jhaveri, Chairman, MSJ Capital & Corporate Services Pvt Ltd.

"Increase in the tax slabs will be very counterproductive to what the government wants. But increasing long term gains tax for equity as an asset class from 1 year to 3 years, will only help the investors family".

RM Vishaka, MD of India First Life Insurance, called for the need to differentiate on income and equity as a businessman and an investor.

"If it's traded as business, then it is a business model and needs to be taxed as usual. For retail investors it needs to be defined in other way accordingly," Vishaka said.

"Having a fixed slab of say 1 lakh is 50% for someone who has 2 lakhs and means almost nothing for the one with 20 lakhs. We haven't moved from those slabs since decades now and need to redo the entire thing".

Another important aspect raised by Sharad was the change in the definition of long-term debt to 3 to 2 years, or ideally one year.

"Earlier the banks were short of funds and the scenario has completely changed today and I see no reason to continue with a 3 year definition", Sharad said.

"Increasing taxes will be detrimental, but bringing them at par, that there is no tax advantage of being either a risk lover or a risk averse is critical", added Aniruddha Bose, Consulting Editor at BW Businessworld.