Long Term Capital Gains
So far investors were required to pay tax on gain (i.e., Sale price – Cost of Acquisition), from listed equity shares and equity Mutual funds only when they are sold within 12 months of purchase (i.e., short term transaction). In case these investments are sold after 12 months (i.e., Long term transaction), benefit of no tax has been enjoyed.
Proposed changes :
However, the current change in the budget proposes to tax the gain on long term transaction at the rate of 10%, to the extent which exceeds INR 1 lakhs for the year. Which means if your total gain from long term transactions on equity shares or equity mutual funds for the year is not more than INR 1 lakhs there will not be any tax payable as per the proposed change from FY 2018-19.
What is cost for calculation of gain :
Appreciation of equity after January 31st 2018 will only be considered for calculating gain. Hence cost for long term equity shares or mutual funds sold before February 01, 2018 will be either actual cost or market value as on January 31st 2018.
Sale before March 31st, 2018:
The proposed change shall apply only for sales made after March 31st, 2018. If there is any sale on or before March 31st 2018, gain on long term equity shares and mutual fund shall hold applicable.
Other limitation for claiming exemption of 1 lakh:
It is worth noting that this Long term capital Gain exemption of upto INR 1 lakhs will be available only if applicable STT (Securities Transaction Tax for trading on stock exchange) has been paid on the equity shares both at the time of purchase and sale. However, in case of equity oriented mutual funds, exemption will be available if the STT is paid at the time of sale alone also.
Sale of employee stock benefits :
Sale of shares held in foreign group company as employee stock benefit plan would not be covered under the above proposed changes. Any such sale will continue to be taxable and employee should pay capital gain tax on surplus value from sale in excess of perequisite value by employer.