LTCG Tax on Equity Shares, Equity oriented Mutual Fund (MF) units
Taxability upto F.Y. 2017-18/A.Y. 2018-19
Capital gains arising from sale of equity share/unit of equity oriented fund provided from tax, where the share/unit is held for a period of at least 12 months. The exemption is available if securities transaction tax (STT) is paid on the transaction. [Sec 10(38) ]
Taxability for F.Y. 2018-19/A.Y. 2019-20
Sec 10(38) amended and now LTCG on Equity shares and units of Equity oriented Mutual Fund shall be taxed @ 10% effective from 01-04-2018 i.e. F.Y. 2018-19/ A.Y. 2019-20 on gains exceeding ` 1,00,000/-.
This LTCG will be taxed at 10% for all listed equity shares where STT is paid on purchase and sale and at 10% for units of equity oriented MFs where STT is paid on the sale of these units. As STT is paid/deducted if you sell your equity MF units back to the MF or on the stock exchange the new LTCG regime would apply to these.
This means that the LTCG tax regime would be unchanged for unlisted equity shares where STT is not paid on purchase or sale.
Taxability shall be calculated in either of 2 below noted methods:
Method I: Date of Purchase on or before 31-01-2018.
The cost of acquisition of the share or unit bought before Feb 1, 2018, will be
the higher of :
1. the actual cost of acquisition of the asset
2. the lower of :
3. The fair market value of this asset (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 unit) and
4. The sale value received/accrued when the share/unit is sold.
Method II: Date of Purchase after 31-01-2018.
For shares or equity MF units bought after 31.1.2018, capital gain would be computed as = Selling price – actual cost of acquisition (without indexation).
Indexation of the cost of acquisition (determined as per above formula) will not be allowed. Setting off cost of transfer or improvement of the share/unit will also not be allowed.
Therefore, cost of acquisition is determined as per formula explained above, this cost will be subtracted from the sale value and the LTCG will be arrived at.