Equity investors should remain invested despite the new direct tax code proposing the return of the long term capital gains tax. At least thats what the government wants investors to believe, finance ministry officials have told NDTV.

Investors holding long term shares till March 31, 2011, will not be subjected to the long-term capital gains tax. And April 1, 2011 may become the new cutoff date, to begin the calculation of the long-term capital gains.

This means, stock prices as on April 1, 2011 will be the new base price for computing capital gains tax.

The government will also be providing abatement on the calculation of long-term capital gains, which means only a certain percentage of the capital gains, will be taxable.

This rate of abatement will lower the tax burden on equity investors considerably.

Similarly, even short term equity investors, will have the option to roll over their investments.

In order to escape a higher 30 per cent short term capital gains tax from April 1, next year, investors will be given the option of holding on to their investments for the full fiscal of 2011-2012.

Once the full fiscal criterion is satisfied, short term investments will qualify as long-term instead, thus lowering the tax burden, and helping the government promote, the stability factor.