Wealth Management

With the DTC(Direct Tax Code) set to come in by April 2011, a few more remaining options for the middle class to build a tax free corpus would have disappeared. While the lower tax slabs would be welcome, investors have to be aware that under the EET regime the growth (read long term capital gains) will be taxed in the year of redemption. Assume you have invested Rs. 100,000 in a stock or MF today and over 20 years it grows to say Rs. 35,00,000 under the current system, the 34,00,000 would be tax free as it is long term capital gains. However under the EET regime your 100,000 would be indexed based on the capital gains index provided by Income Tax and the indexed base would be then subtracted from the sale proceeds to arrive at taxable capital gains.

You have six more months to build a decent nest of eggs which will continue to remain tax free using existing provisions.

Contact the author to build your personalised tax strategy and benefit from it over the years to come.

Regards,

Balaji Rajagopalan (TRY2XL@gmail.com - 9819521169)