This proposed direct tax code is atruly depressing stuff for a person like me whose entire personal finance planning revolves around equity investments.
I could easily envisage a scenario where I would be selling lot of my current investments in the period of bubble like valuations and end-up paying 30% of it to GOI. So, risk is all mine and returns to be shared!! Great concept!!
I could not think any way out, except probably one very tortured way by investing in unit linked investment plans. (I am not talking about unit linked insurance plans. What I have in mind is unit linked investment plans without any insurance attached to it).
All unit linked plans provide options for switching between 100% equity allocations to 100% allocations to liquid funds at anytime during duration of plan. Such features could be utilised to book equity profits and park the proceeds in liquid funds without attracting capital gains as you would not receive gains in your hands. The withdrawals then can be calibrated in line with tax bracket or it can be switched back to equity mode at appropriate time.
The drawback here is you lose control on decisions to where to invest. Also, associated chrages could be high.
I do not like investing this way but it might be better than to handover 30% of gains to GOI.
I would like to know opinion of members on this thinking. I think a CA can give better idea.
In any case, this provision has potential to disrupt secular bull market in Indian equity. I have heard about disruptive innovation but this is probably first time, I am seeing disruptive innovation in taxation!!
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