There is a possibility that Long Term Capital Gains on equity mutual funds would be levied in the Union Budget 2018-19. At the moment equity mutual funds if sold after one year do not attract any tax. However, if you sell your equity mutual funds before one year, there is a tax liability of 15 per cent.
Also, the good thing if it is implemented would be that it would be on par with other asset classes like gold, real estate etc., where there is a long term capital gains tax.
At the moment equity shares and equity mutual funds are treated very differently when compared to other asset classes like gold and equity mutual funds. Why should that be the case?
There has been a surge in stock prices with the Sensex now hitting 35,000 points, thanks to inflows from mutual funds. Investors in mutual funds over the last 1 year have made returns of anywhere between 20 to 60 per cent. Just imagine there is no tax on them, if they sell their investment after one year, which is veru unfair.
A Long Term Capital Gains tax may tone down expectation of returns from investors in mutual funds and would help the government treat all different investments fairly.