As announced by FM Arun Jaitley, the long-term capital gains in equity markets will now be taxed at 10%. Under the new regime, any capital gains arising from the transfer or sale of a long-term capital asset being an equity share or a unit of an equity-oriented fund will be taxed if profits exceed Rs 1 lakh during the fiscal year 2018-19. Currently LTCG on sale of equity share /equity oriented fund was exempted under section 10(38).
LTCG regime till 31st March,2018
The Budget proposes that LTCG tax will have to be paid on profit booked after 31st March. Sale of shares made till 31st March, the existing law will apply and LTCG will not be applicable. So if you sell before 31st March, a stock that has been held for more than a year, you do not have to pay tax. However, if you sell it on or after April 1, LTCG tax will apply on the gains.
How LTCG will be calculated after 1st April, 2018
If an investor sells stock or equity mutual fund held for over a year on or after April 1, LTCG tax will be calculated @ 10%.
The cost of acquisition/ Cut off price of the share or unit will be the higher of:
a) the actual cost of acquisition of the asset
b) highest price of share on stock exchange on 31.1.2018 or when share was last traded .NAV of unit in case of a mutual fund.
Capital Gain = Selling Price – Cut off Price
Different Scenario with practical example on selling of shares on or after april,2018
Case1. An investor bought 2500 shares on 05-11-2017 at a price of Rs, 180 each. Closing price as on 31st January ,2018 is Rs. 200 and selling price is Rs. 250 on 25-04-2018.
LTCG = 2500 * (250 - 200 ) = Rs. 125000/-
Tax will be levied on (Rs 125000 – 100000*)*10% = Rs. 2500/-
(*Capital gain will be charged if amount exceeding Rs. 100000/-)
Case2 Buy Price < 31st Jan Price
Buy Price - 100
31st Jan Price -150
Selling Price - 200
Capital Gain = 200 – 150 =50/ share
Case 3. Buy Price > 31st Jan Price
Buy Price - 500
31st Jan Price - 400
Selling Price - 600
Capital Gain = 600 – 500 =100/ share
Case 4. Selling Price < Buying Price
Buy Price - 100
31st Jan Price - 150
Selling Price - 50
Capital Loss = 50 - 100 = 50 / share
Case 5. Selling Price < 31st Jan Price
Buy Price - 100
31st Jan Price - 150
Selling Price - 110
Capital Gain = NIL*
(*Tax liability is nil even if you gain Rs. 10, because higher of buying price & cut off price is
considered.)
Regards
CA Manish Jha
CAclubindia
