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Stocks with long-term capital gains tax, Mutual funds covered

There are some significant things to know regarding the long-term capital gains tax on equity which includes-

  •  The Finance Bill, 2018 proposes to offer a new long-term capital gains tax on the equity shares in a company which is listed on a stock exchange which is recognized, unit of an equity oriented fund and the unit of a business trust. This proposed tax will be applied to all the above assets in case the assets are held for twelve months minimum from the date they were acquired.
  •  Only if there is a transfer of the long-term capital asset on or after 1st April 2018 as per the clause (47) of section 2 of the income tax act will the long-term capital gains tax be levied.
  • The long-term capital gains will be calculated after the cost of acquisition is deducted from the full value of the long-term capital asset.
  • The actual cost of the asset will be the cost of acquisition if it is acquired before 31st January 2018. But, if the actual cost is lower than the fair market value, then the market value will be deemed to the cost of acquisition. However, if the full value of the transfer is less than the fair market value, then the full value or the actual cost whichever one is higher will be deemed to be the cost of acquisition.
  • If no trading takes place on 31st January 2018, then the fair market value will be the highest price that is asked on a date preceding 31st January 2018. If it is an unlisted unit, then the net asset value of the unit will be the fair market value of the unit.
  • The benefit of the inflation indexation of the cost of acquisition will not be available to compute the long-term capital gains as per the new tax regime.
  • The new proposed tax regime will be applied to the transfer made on or after 1st April 2018. The existing regime will provide an exemption under the clause 38 of section 10 of the act and it will be continued to be available for all the transfers which are made on or before 31st March 2018.
  • The cost of acquisition will be the fair market value on 31st January 2018, the gains accrued up to 31st January 2018 will be continued to be exempted.
  • The long-term capital gains more than Rs. 1 Lakh from the transfer of the assets which are made on or after 1st April 2018 will be taxed at 10%. There will be no tax accrued up to 31st January 2018. The holding period will be counted from the date of the acquisition.

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