Long Term capital gain on listed shares now taxable @10% u/s 112A of the income tax act.
Long term capital gain on sale of listed security shall be Applicable on any sale of listed security after 1.4.2018
Changes in section 10(38):-
The following provision has been added under clause 38 of section 10 after the above amendment “Provided also that nothing contained in this clause shall apply to any income arising from the transfer of long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, made on or after the 1st day of April, 2018.”
Thus Section 10(38) which used to make long term capital gain on sale of listed shares and securities exempt from tax has been amended to make LTCG on listed equity share taxable from 1.4.2018.
So if one don’t want’s to pay such tax or is getting some good price till 31.3.18 he/she can sell the shares and get such gain exempt from income tax.
New section 112A has been inserted:
Earlier all types of long term capital gain used to be charges to tax under section 112 but now a new section 112A has been inserted to charge tax on long term capital gain on listed equity share.
This section cover listed equity share, equity oriented fund, share of a business trust on which securities transaction tax is paid.
Thus it is applicable only on shares listed in India
The amount of tax shall be calculated on aggregate of such total capital gain in excess of ₹1 lakh at the rate of 10%.
Cost of acquisition of such asset:
The cost of acquisition for the purposes of computing capital gains referred to in sub-section (1)
in respect of the long-term capital asset acquired by the assessee before the 1st day of February, 2018, shall be deemed to be the higher of—
(i) the actual cost of acquisition of such asset; and
(ii) the lower of—
(a) the fair market value of such asset; and
(b) the full value of consideration received or accruing as a result of the transfer of the capital asset.
Fair market value shall be highest price on 31.1.18 and if no trading done on such date then Highest Price on Date preceding to 31.1.18.
Example:
- If one sells long term capital asset on 2.4.18 at the price of 150 which was purchased at price of 100 and its value on 31.1.18 is 120 so taxable capital gain is 150-120= ₹30.
- If one sells shares at ₹150 whose purchase price was ₹120 and price on 31.1.18 is ₹100 so cost Shall be highest of 100 and 120 i.e. 120 and so capital gain taxable shall be 150-120= ₹30.
- If selling price is ₹120 and purchase cost of asset was ₹100 and value on 31.1.18 is ₹130 then cost will be calculated as 120 and there will be no loss.
- If the selling price of shares is ₹100 and purchase cost of asset is ₹120 and the value of share on 31.1.18 is ₹110, then the cost of the asset will be taken as ₹120 and in this case assessee will have a loss of ₹20 which he can set off against his capital gain income and carry forward. However still there is no detailed clarification on this.
Some other important points:
Earlier the loss on sale of such long term capital asset was not allowed to be set off against other income as income from such long term capital asset was exempt, but now since the income from such long term capital asset is taxable therefore the loss on sale of such long term capital asset is also allowed to be set off against other capital gain income and carried forward.
As per section 112 if the total income of an assessee other than this long term capital gain is less than maximum amount chargeable to tax then amount of long term capital gain shall be reduced by such amount.
Tax shall be payable on shares traded in International Financial Services Centre even if STT not paid.
No indexation shall be applicable.
No deduction shall be allowed under chapter VI-A (i.e. Deduction u/s 80C to 80U) against such capital gain income.
No rebate u/s 87A on tax payable on such capital gain income.
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