Tuesday
Friend on WhatsApp. "Every two weeks rebalance means STCG on every cycle. The taxman eats the alpha. A one-year hold has to win after tax." Pulled up the actual math. The objection sounded right. The arithmetic did not agree.
STCG on equity
20%
Holding under 12 months. Higher rate, same gain.
LTCG on equity
12.5%
Holding over 12 months. Beyond the Rs 1.25 lakh annual exemption.
The retail intuition
Higher tax rate must mean lower after-tax return. So the slower strategy wins on the cheque.
60% gap
Higher tax rate. Bigger after-tax cheque. Both can be true.
Tax is a percentage of the gain. It is not a tax on the rebalance. If the gross return clears the drag, the higher bracket loses to the bigger number.
Swipe . the side-by-side after-tax math →