What you invest in and how long you want to stay invested should depend on what you intend to do with that money. It may be for a house you want to buy in five years, for your child's college education in a decade, or for your retirement in 25 years. And this, in turn, determines how risky and liquid your investment ought to be. But this is the ideal scenario. The reality, though, is very different. You are forced to choose among stocks, real estate, gold, and other assets based on the government's complex rules for taxing your profits from these investments. You get the concessional tax rate on stocks if you hold them for more than a year. But if it's real estate, it's two years. And if it's gold or non-equity mutual funds, it's three. And then, there are differences in tax rates. “Investments are being made in an asset class on the basis of its tax advantages and not on how good that asset class is," former revenue secretary Tarun Bajaj said in November last year, before his retirement. The government would do well to listen to him in its last Union Budget—to be presented on 1 February—ahead of the 2024 general elections. There have been calls for making the eligible holding period the same for all asset classes. But, as Anand writes in his analysis today, untangling the messy knot—taxation on capital gains—is not for the faint of heart. On top of that, capital-gains taxes added an estimated ~$10 billion to the Indian government’s kitty in the year ended March 2022. So the Centre wouldn't want to make a big dent in it with reforms that are too radical. Clearly a case of the government being caught between a rock and a hard place
