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Budget 2018: LTCG Tax explained

Raghav Bisani
/ Categories: Mindshare, Markets
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Finance Minister, Arun Jaitley in his Budget speech proposed to tax Long-Term Capital Gain (LTCG) earned from equity. On Thursday, the Section 112 of the Income Tax Act was amended to provide tax on LTCG on the profits above Rs. 1,00,000/- without indexation benefit.

For the purpose of taxation, Cost price shall be higher of:

1) Actual cost price at the date of purchase or

2) Highest price as on January 31, 2018.

Long-term gain before January 31, shall not be taxable and capital loss shall be allowed to be set off (case when actual cost is higher than January 31). This will provide relief to ace/high investors with massive capital gain from stock market. Please note that tax on STCG shall continue to be taxable at 15 per cent.

To clear the doubt of our investors, we have illustrated two scenarios when stock has been purchased before or on January 31, 2018:

Case 1: When Actual cost price is higher than 31/01/2018 price

Particulars

Scenario 1

Scenario 2

Actual Cost

100

100

Highest price on 31/01/2018

70

80

Presumed Cost Price

100

100

Sale Price after 365 days

200

80

Capital Gain/(Loss)

100

(20)

No. of shares

5000

5000

Total Capital Gain/(Loss)

5,00,000

(1,00,000)

Deduction of Rs. 1,00,000

1,00,000

NA

Capital Gain for tax calculation

4,00,000

Loss can be set off against LTCG

Tax @ 10%

40,000

NA


Case 2: When Actual cost price is lower than 31/01/2018 price

Particulars

Scenario 1

Scenario 2

Actual Cost

100

80

Highest price on 31/01/2018

130

130

Presumed Cost Price

130

130

Sale Price after 365 days

200

100

Capital Gain/(Loss)

70

(30)

No. of shares

5000

5000

Total Capital Gain/(Loss)

3,50,000

(1,50,000)

Deduction of Rs. 1,00,000

1,00,000

NA

Capital Gain for tax calculation

2,50,000

Loss can be set off against LTCG

Tax @ 10%

25,000

NA

 

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2 comments on article "Budget 2018: LTCG Tax explained"

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Jagjit Mahal

What is the highest price of 31.01.2018? Is it the market closing price of 31.01.2018 or the highest price of the shares gone on 31.01.2018. I think it’s the fair value price & that’s the closing price of 31.01.2018. If it’s the highest value of that date then how to know what it was on this date


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Jagjit Mahal

I need clarification on the following issue:- Earlier short time losses can be set off only against short time gains. Long term losses could not be adjusted against long/ short term gains. Now in this budget long term gains are taxable,leaving 1.0 lac free. Now can short & long term losses can be adjusted against either short term gains and also against long term gains? This may be clarified

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