India Hikes Taxes on Equity Investments; Fund Managers See Short-Term Hit

• The Indian government has increased the tax rate on equity derivatives trades and capital gains from equity investments, effective immediately for some changes and from October for others.
• Taxes on stocks held for less than one year have been raised to 20% from 15%, and for those held over one year to 12.5% from 10%, which may hurt short-term market sentiment but incentivize long-term investment.
• The securities transaction tax on futures has been nearly doubled to 0.02% from 0.0125%, and on options to 0.1% from 0.0625%, causing a temporary dip in major stock indexes.
• Fund managers believe the tax changes will bring rationality to options trading and encourage better investment behavior, despite being a short-term negative for the market.
• Additional tax adjustments include reduced taxes on listed bonds and unlisted shares held by foreign companies, and changes to the taxation of company share buybacks.

Source: Reuters