As per the announcement by the FM, a Tax on Long Term Capital Gain on sale of Listed Equities Shares or Equity Oriented M. F. or a unit of Business Trust, has been introduced for gains above Rs. 1 Lakh @ 10% of Capital Gain without benefit of Indexation. However, the gains earned till 31st January, 2018 shall not be taxed and only the incremental gains above the higher of Cost Price or Highest Share Price on 31-01-2018 shall be taxed.
SUMMARY:-
a) Provision Applicable On : Listed Shares or Equity Oriented MF or a unit of Business Trust
b) Long Term – If the shares or MF is held for 1 year or more it is Long Term;
c) Basic Exemption Limit – Rs. 1 Lakh
d) Condition – STT must have been paid on acquisition & sale of the Equity Shares and for others at the time of transfer;
e) Taxable LTCG – Sale Value Less (-) Cost of Acquisition
f) For Shares acquired before 01-02-2018 – Cost of Acquisition shall be higher of Actual Cost or Fair Market Value (Fair Market Value is the highest price of a share on 31-01-2018 on any Recognised Stock Exchange but shall not exceed the Sale Price or full value of consideration)
g) Applicability of this Provision – After 01-04-2018 [F. Y. 2018-19 and onwards]
This can be understood by following EXAMPLE:-
100 shares of XYZ Ltd were purchased on 10.02.2017 for Rs. 50,000/-. Highest Value on NSE & BSE as on 31.01.2018 is Rs. 1,00,000/-
The Tax Liability under different situation are as below:-
a) If sold on or before 31.03.2018 for Rs. 120000/-
Tax – NIL (In FY 2017-18 LTCG is fully exempt)
b) If sold on 01.07.2018 for Rs. 150000/-
LTCG = (150000-100000) = 50000
Tax – NIL (Since LTCG upto 1 Lakh is Exempted)
c) If sold on 01.07.2018 for Rs. 250000/-
LTCG = (250000 – 100000) = 150000/-
Tax = (150000 – 100000) * 10% = 5000/-
d) If sold on 01.07.2018 for Rs. 90000/-
LTCG = (90000 – 90000) = 0 (As the Fair Market Value cannot exceed Sale Price)
Tax = NIL