Question

Why chidambaram decided to abolish long term capital gain tax?

Answer 1

The feeding frenzy on the possibility of long-term capital gains tax coming to equity for a while with editorials and TV shows hand-wringing about the retail investor getting hurt. But will we? Is a long-term capital gains tax on equity such a bad idea? Let’s get the basics out of the way first. The money we invest in different assets (bank fixed deposits or FDs, bonds, gold, real estate, equity and into some of these through mutual funds and bundled life insurance plans) throw off money in different forms. There is rent, interest and dividend that comes as income from an asset. This is income from owning and using an asset—financial (stocks, FDs and bonds) or real (gold and real estate). When you sell the asset you can either make a profit or a loss. Profits on sale of assets are called capital gains and in India are taxed under two heads—short-term and long-term.
Both short-term and long-term are defined in different ways for different asset classes (see table to understand this better). Not only is short-term different for different assets, the tax rates vary too. In the table we see the preferential treatment given to equity over bonds, real estate and gold. The asset becomes long-term if you hold it for a year; for others, the period is 3 years. So the chindambaram decided to abolish the long term capital gain tax.

Answer 2

Answer:

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