Indian savers and investors are adopting new ways of saving tax. Now individual investors are investing more than Rs 8,000 crore in SIP every month. This inflow of fresh investment is quite stable and the National Pension Scheme (NPS) and the Employees Provident Fund Organization (EPFO) combine to make it a strong base for the Indian equity market. Givers and long-term investments are moving towards the new world. Apart from this, our law regarding capital gains tax is still entangled in old thinking. The structure of capital gains tax on equity in India, rather than the growing economy, is largely based on the anti-rich idea of about 5 decades ago.

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Further, it is working against the interests of investors who want to increase their returns and raise large sums of money. The root cause of this problem is that the tax law considers capital gains to be a transaction. Whenever an investor sells a unit of a fund in a mutual fund investment, the profits or gains made to it are considered capital gains under the tax law. If the period for holding an investment in the fund is less than one year then it is short term capital gains and if the period for holding the investment is more than one year then it is long term capital gains. In addition, long-term capital gains in equity funds were abolished in 2005 and were 2 until 2018. The current tax law is such that it punishes long-term investors, although it should be encouraging for long-term investors. In the long term, there comes a time when the investor feels that a better option has come in the market than the mutual fund he has invested in.

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If the investor sells the investment in that fund and invests it in another fund, then he has to pay capital gains tax on the profits from the first fund. So either it reduces its returns or the investor should compromise with lower returns to avoid paying tax. In order for an investor to take full advantage of his investment, it is necessary that selling equity funds and investing in other equity funds is not considered a transaction. Along with this, this demand has been made for a long time. The same Association of Mutual Funds of India (Amfi) had also placed this demand before the Finance Minister. Before that year 2018 people were not very vocal about this demand because Long Tax on term capital gains was zero. However, if someone redeems his investment to spend money, then he should be subject to capital gains tax. But investing in other funds after redeeming long-term investments should not attract tax.

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