Long-term capital gain tax...

The Indian Union Budget 2018, which was announced on 1st February 2018 has Reintroduced Long Term Capital Gain at 10% on stocks which were held for more than a year and sold subsequently. This is, however, brought with a grandfathering clause.

Few points to note are:

1. Long-Term Capital Gains will be taxed at 10% if the total gain is more than 1 lakh
2. This will be applicable for sales executed on or after 1st April 2018
3. Sale on or before 31st March 2018 will continue to be exempted from long-term capital gain

Therefore, when one sells stocks held for more than a year, on or after 1st April 2018, it will be subject to tax on the difference between sale price and cost. A grandfathering clause is brought in for this purpose, and the cost will, therefore, be arrived using the following method:

Calculation of Cost of acquisition

Higher of a) and b) where

a)  is the actual cost of acquisition  and

b)  is  X where X is =   lower of the highest price of the stock on 31st Jan 2018 and actual sale price

Illustration

Scenario	Purchase date	Purchase Price	highest price as on 31/1/2018	Sale Price	Cost for the purpose of computing LTCG	LTCG	Tax
Sale done before 31-Mar-18	02/02/17	900	1100	1250	900	350	0
Sale done after 31-Mar-18	02/02/17	900	1100	1250	1100	150	15
Sale done after 31-Mar-18	02/02/17	900	1100	1000	1000	0	0
Sale done after 31-Mar-18	02/02/17	900	1100	700	900	-200	0

Please note that LTCG Tax will be deducted when the total LTCG exceeds 1 lakh.

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