Taxation of LTCG in hands of Resident Persons.

Now, let's talk about period of holding of shares required to call it long term capital gain (LTCG):

Securities listed in a Recognised stock exchange in India - held for more than 1 year.

Shares other than above(in India or abroad) - held for more than 2years.

Now, taxation of LTCG on shares Tax on LTCG on equity shares (either listed or not), where STT paid on acquisition (except acquired before 01/10/2004 or where STT not chargeable) & STT paid on transfer -

Finance Act 2018 has added section 112A which provides a concessional tax rate of 10% on LTCG in excess of Rs. 100000.

For e.g. if LTCG is of Rs. 220000, tax will be Rs. 12000 [10% of (220000–100000)]. But no benefit of Indexation will be available, generally in computing LTCGs, cost is indexed.

For e.g. if Cost is Rs. 100000 in F.Y. 01–02, indexed cost will be Rs. 280000 in F.Y. 18–19 as per Cost inflation index(CII).

But not allowed in case of LTCG u/s 112A.

Suppose, Sale consideration= Rs. 400000 in above example. LTCG (with indexation) = Rs. 120000 (400000–280000) and

LTCG u/s 112A (without indexation) = Rs. 300000 (400000–100000).

Tax u/s 112A = Rs. 20000 [10% of (300000–100000)]

Though benefit of grandfathering is given with the amendment in section 55 i.e. for units acquired before 01/02/2018 and will be taxable u/s 112A,

cost of acquisition (COA) shall be -

Higher of: Actual cost of acquisition Lower of : FMV as on 31/01/2018 or

Actual sale value

For e.g. if actual COA = Rs. 400;

FMV as on 31/01/2018 = Rs. 740;

Sale value = Rs. 750 then deemed COA will be Rs. 740 and

LTCG will be Rs. 10 (750–740) not Rs. 350 (750–400).

2. Tax on LTCG on securities listed in recognised stock exchange in India (other than equity shares u/s 112A)

- Whatever is lower of: Tax @ 10% (without benefit of indexation)

Tax @ 20% (with benefit of indexation)

3. Tax on shares (other than 1 & 2) i.e. securities other than equity shares not listed in recognised stock exchange in India - Tax @ 20%.

#Benefit of basic exemption limit is available (if balance income is less than basic exemption.

#Any long term capital loss arising from above can be set off from any LTCG and carry forward for 8 years.

#Deductions under Chapter VI - A (section 80C to 80U) not allowed against this LTCG.