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By Latha Venkatesh Mar 27, 2023 10:20:04 AM IST (Updated)
Finance Bill 2023: The largest casualty category of the move to end LTCG tax for gains from debt funds are the debt funds. But the entire Rs 20 trillion rupees of monies in debt funds aren’t affected because many couldn’t avail of the current LTCG benefits anyway. The ones really hit are the target maturity funds and the Bharat Bond ETFs.
The government on March 24 unexpectedly ended the lower long term capital gains (LTCG) tax for gains from debt funds. The following seeks to analyse the losers (and some minor winners other than the govt) from this move:
Top among the losers is the tradition of democratic budget — making through widespread debate over tax proposals. The removal of this three decade old benefit was brutally swift and secretive. Even the removal of benefits for the Rs 75,000 crore market-linked debentures found mention in the Budget 2023 speech and was discussed before and after the speech. However, that a tax benefit which impacts a Rs 20 trillion asset class was done away with without any public debate is disappointing.
Coming to financial entities: the losers are of course funds with less than 35 percent invested in Indian equities – these include many debt funds, gold funds, fund-of-funds and funds investing in foreign stock markets.