Budget 2018 LTCG Tax @ 10% on Stocks and Mutual funds

Budget 2018 LTCG Tax is now the biggest news among equity investors. However, many interpreting it in different ways. Hence, let us understand the Budget 2018 LTCG Tax on Stocks and Mutual Funds.

Before jumping into understanding this change of Budget 2018 LTCG Tax, let us first understand the basics rightly.

LTCG Tax on Stocks and Mutual Funds before the Budget 2018

Before the Budget 2018, the taxation of Stocks and Mutual Funds was as below.

Holding period for Stocks and Equity Mutual Funds-If held for less than a year then it is considered as STCG and if held for more than a year then it is considered as LTCG.

Holding period of other than stocks and Equity Mutual Funds-If held for less than 3 years then it is considered as STCG and if held for more than 3 years then it is considered as LTCG.

Below table will give you the tax structure of Stocks and Mutual Funds as per Budget 2017.

Stocks and Mutual Fund Taxation before Budget 2018

Budget 2018 LTCG Tax on Stocks and Mutual funds

Do remember that post Budget 2018, there is no change in STCG (Short Term Capital Gain) and also the rules in relation to holding period to identify the LTCG or STCG. The only change that affected is LTCG. Hence, let us concentrate on LTCG.

In Budget speech, Mr. Arun Jaitly mentioned this new taxation as below.

I propose only a modest change in the present regime. I propose to tax such long-term capital gains exceeding `1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31st January 2018 will be grandfathered. For example, if an equity share is purchased six months before 31st January 2018 at  Rs.100/- and the highest price quoted on 31st January 2018 in respect of this share is Rs.120/-, there will be no tax on the gain of Rs.20/- if this share is sold after one year from the date of purchase. However, any gain in excess of Rs.20 earned after 31st January 2018 will be taxed at 10% if this share is sold after 31st July 2018. The gains from equity share held up to one year will remain short-term capital gain and will continue to be taxed at the rate of 15%.“.

Considering this, many assumed the calculation as per their wish. However, Finance Bill 2018 clearly mentioned how to arrive at the cost of acquisition of the capital asset. I share the same as below.

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 the consideration received or accruing as a result of the transfer of the capital asset.

Let us calculate the LTCG and STCG based on the Budget 2018 clarification. Here I am giving you both the scenarios of how the LTCG and STCG be taxed from now onward on Stocks and Equity Mutual Funds and also for the existing investors.

Budget 2018 LTCG Tax on Stocks and Mutual funds

Hope now you all got the clarity on this subject. There is a huge cry today that what will happen to my investments. Because many of us invested in the stock market or stock market-related products in view of TAX-FREE and also for the BETTER return.

Those invested for the sake of TAX-FREE will definitely be finding it difficult to digest. However, those who invested for BETTER long-term real return, they no need to worry.

At the end, we can’t force our views on Government and bend it as per our terms right??

Refer our related posts:-

183 Responses

  1. Hi Sir,

    I have a doubt on this. i had invested in canara robeco equity tax saver from 2010 through SIP. My purchase value is 26.64 on 16th dec 2010. on 31st Jan 2018 the NAV was at 62.7. On 14th May the NAV was at 60.51. I have sold 5660.185 units on 14th May at 60.51. Since the gain i had till 31st Jan is 354893.5995, but it dropped on 14th may to 342497.79435. In this case the sale value is less than the fair market value as on 31st of January, 2018. So, the long-term capital gain will be NIL or still i need to pay tax?


      1. Thank you very much sir for your quick reply. Very much appreciate your blogs and responses to user queries..

  2. Dear Sir,

    Just want to understand whether the Child Linked Plan (on maturity) will also has LTCG of 10%.
    I was told by a advisor that all the Child Linked Investment Plan has a Income Tax Benefit under section 80C also the maturity amount is exempt from LTCG . Please confirm.

  3. My souse had purchased a residential plot in Lucknow on 24.02.2010 as per below details –
    1. cost of plot Rs. 4,50,000
    2. cost of stamp duty paid – Rs. 27,000
    3. Court fees paid – Rs. 10,000
    4. Misc. expenses incurred for registry of plot – Rs. 6,000
    5. expenses incurred towards construction of boundary wall of the plot – Rs. 1,00,000
    6. Total cost/expenses incurred – Rs. 5,93,000

    The same plot was sold by her on 19.04.2018 as under –
    Sale price received – Rs. 16,00,000

    Request you to please confirm the LTCG on the above and advice what she should do now.

    Rajeev Shukla

      1. Thanks Basavaraj.
        But please suggest where to get the CII / LTCG latest calculator.
        It is not showing in your website hence requested your help.
        please provide any link etc.
        Thanks you.

          1. Hello Basavaraj Ji,

            now will it be possible to tell the LTCG of the concerned property please ….how much tax to be paid or how to save it.

            Purchase cost Rs.5,93,000 on 24.02.2010

            Selling rate Rs. 16,00,000 on 19.04.2018

  4. Sir, I have substantial investment in Dividend Payout option in MFs to enable me meet my funds requirements for monthly expenses as i do not have any other source of income. however, i am told that the dividend income from MFs per year, if it does not cross 10 lacs, i dont need to pay any tax and if it crosses, then, i have to pay tax or LTCG on income beyond 10 lacs. pl confirm the latest position with reference to the recent budget

    i am confused. regards Swaminathan

      1. Thankyou Sir for your Prompt reply. i think the AMCs are confused and they are not clear on this issue.


  5. I am nri. My son is resident Indian. Can I open ppf account and deposit money from my local resident savings account into his ppf account?

    My wife is having less than 2lakh income (she files ITR). I deposit 1.5lakh in her ppf.
    Can she be gaurdian for SECOND son and I give her 1.5lakh to deposit in second son’s ppf account?

    1. Anuj-If your son is resident Indian and also a major, then he can open the account and you can deposit into his account. Your wife is already owning PPF, and if she be the guardian of your second son, then the combined limit for her to invest is Rs.1.5 lakh only.

      1. Thanks for your prompt reply.
        It means I cannot open new PPF acct as I am NRI.
        I cannot open new ppf acct. and contribute for my first son as he is minor.
        Second son is also minor…
        so we are left with no choice. Cannot open any new PPF account.
        Am I right?

        Can I invest instead of ppf in Tax saving ELSS (to avoid tax)[investing 1.5L in PPF of wife + 1.5 Lakh additional want to invest in ELSS–>means total 3lakh].
        Please inform.

        1. Anuj-Yes your understanding about NRIs opening PPF account is correct. Don’t compare PPF with ELSS. Both are different assets with a different purpose. Without knowing your financial goals and life, how can I guide you BLINDLY?

  6. Hello Sir,

    After budget proposal, I am bit confused where to invest my amount? Stocks or MF’s or any other possible investments

    My need to invest around 35Lakh in lumpsum and I need regular income [ say monthly / Qtrly]

    Please suggest some investment ideas.


  7. Dear Sir,

    I have 4 funds and current value is more than 400000/-..My friend suggested to get the money before Apr 1st 2018 to skip the 2018 Budget 10% tax(believe its called LTCG).
    And also i have one more query, (As per TOI article) can we get relaxation if we start SIP for kids and give to them once they crossed 18 as Gift, so we can avoid that Tax. Is it a good move?

    If you reply above my queries , i can withdraw my money and start SIP for my son/daughter…Please advise Sir!!


    1. Siva-The whole Rs.4 lakh is not taxable. Only the gain from your investment and that also whatever the gain more than Rs.1,00,000 is ONLY taxable at 10%. Due to clubbing provisions, if your kid is minor, then such gain is again considered as taxable income for you.
      Withdraw money if your goal is about to reach and also invest in a product or asset to reach your financial goals but not at tax saving benefits ONLY.

      1. Thanks you very much Sir, for your quick reply!!

        My gain would be around 20k so taxable 10% of that amount only- 2000? Is this applicable after Apr 1st 2018, Sir?
        Believe no taxable if they crossed 18 yrs old. Isnt it, Sir?
        One more Sir, I had chosed the below funds to start SIP based on my risk appetite…need your advise as well 🙂
        =>Mirae Asset emerging Blue chip or Reliance small cap – 5k
        =>Tata Equity P/E ratio fund or Invesco India Contra Fund – Growth – 5k
        =>Tata retirement savings fund – 3k/-


  8. Hi Basu,

    Is this 10% LTCG applies per fund ? or per portfolio? or per PAN ref?

    I have 4 equity funds in my portfolio, If sum of all 4 exceeds gain more than 1,00,000? Will I be taxed @ 10% or individual funds have 1 lakh limit of capital gain?

    Kindly advise

  9. As per my understanding from the article is to calculate LTCG is:

    LTCG = ((Total Generated Interest – 100000)*10)/100

    I have few below queries on same are:

    1. I have a mutual fund portfolio to generate the croup over the long term (20 years). How is Rs 100000 tax free will calculate, if I sale my portfolio in partial withdraw. Do I get the Rs. 100000 tax redemption every time I sale my mutual funds or is Rs. 100000 having some yearly capping?
    2. As 31st January 2018 will be grandfathered date, so all my existing mutual fund gained interest before dates are tax free. If I sale them will this LTCG formula will calculate wherever interest amount gained after 31st January 2018?
    3. If any mutual fund is fall under LTCG but interest amount is less then Rs. 100000. Will I get the complete amount if I sale them or Restructure them (sale old fund and purchase new).
    4. Will this calculate on every mutual fund sale?

    Thanks & Regards,
    Vinod Singh

    1. Vinod-1) Rs.1 lakh exemption is for that particular financial year in total but not for each individual withdrawal.
      2) The formula itself not calculate, it is you who has to arrive at values and calculate.
      3) In that case no LTCG tax.
      4) It is as I said above, per financial year.

  10. I have investment in balanced funds

    1. If I do partial redemption viz. 50% of the amount I want to do redemtpion, then the basis on which the LTCG will be calculated
    2. If I do it before 31.3.18 will there be any LTCG. It is more than a year.
    3. Any TDS is there for LTCG

  11. Hi..
    I’m on monthly SIP investment for Two ELSS, One each Large, Mid, Small & Balanced fund (Total Six).

    Example: After 10 yrs (2000 Rs SIP); total investment 2.4L and total maturity amount 5L.

    At the time of withdrawal / redemption,
    Is it means I have to pay LTCG Tax on 2.6L-1L (Tax: 1.6*10% = 16K) on compounding as well.
    Will it be exempt on LTCG Tax on each SIP gain (i.e compounding) as I’m investing only 24K each year

  12. You seem to be sayig that it is best to do nothing with regards to your holding as over the long term, the damage is minimal etc. But I wonder is thsi is the strategy to be adopted if I have interpreted the new law correctly
    I have a stock A which I bought 3 years ago for Rs 80 or so. It had gone upto Rs 290 or so and now something like Rs 270. When I checked the stock price on Jan 31st, it was Rs 249. So If i sell before March 31st 2018, I have to pay nil tax. After April Ist, I will have to pay according to the stock price ruling at that point, over my defacto acquisition price of Rs 249. So it would seem that I have to definitely sell this one. But I have another stock B which also I am holding for more than a year and the price on Jan 31st was 1300 and now something like Rs 1100. In this case, I don’t have to sell as I can wait tiii it reaches the peak price. Am I right? It would have been better if the fair price was the highest price reached in the last year as most midcaps had fallen from the highs of early Jan as it approached the Budget. But that is nor the case right? Also how do we find the highest price reached on Jan 31st for filing the tax returns?

    1. Raj-It is completely left with your decision of which to hold and which to sell. For me, taxation is part and parcel of any asset. However, taxation is the MAJOR concern for any investment, then I personally not support that. Regarding finding the highest price, you can easily check that with your broker.

      1. Dear Sir With due apologies you seems to have misunderstood as I have mentioned some examples of stocks just for clarity, My question was not about whether you should still invest in stocks because of LTCG tax. It is whether someone holding stocks for more than a year should sell their stock if it goes above Jan 31 level before March 31st because there will be nil tax, only to buy back on April first just for tax purpose. Does it make sense,strictly limited for tax perspective alone.Thansk

  13. Well-explained! What I understand from this piece of information is that I would end up paying a huge amount as 10% from my retirement corpus. Isn’t this unfair with the investor?

    1. Aditi-It is not 10% on your retirement corpus, but 10% on the gain you earned. Hence, the effective taxation will be less than 1%. Hence, suggesting either decrease your return expectation to 1% or increase your investment at same proportion.

  14. Hi Basu,

    What is the cycle of LTCG, april to march? If I have to calculate the LTCG for lets say 2018, will I have to do that in the end of March 2019?

  15. Hi,
    I have done comparison of MF vs PPF of investment for 15 yrs?

    In online calculator of PPF and MF i have entered amount of 10000/annum for PPF , whereas 8000/month for any MF.

    Details are as—

    Any MF-8000/month, inflation-6%, Horizon-15 Yrs, RR-12% avg. Maturity amount=23.4 Lacs

    PPF- 100000/year, Horizon- Ofcourse 15 yrs, RR- 7.8%, Maturity Amount-27.7 Lacs

    Now, guide still we can choose MF investment if above online calculation is OK…….

      1. Hi,

        Totally Agreed!!!
        One of the product is Equity and other is Debt. But it’s not meant that, we can’t compare.

        Pl help to calculate of maturity amount on PPF with inflation for 15 yrs.??? and show the calculation if possible.

        1. Paras-Do you compare Apple with Orange?? Strange 🙂 Also, when it comes to the equity you considered INFLATION. But when it comes to PPF, you simply ignored. If you really want to check the real return, then you must include inflation to both asset class or products.

          1. Hi,

            That’s why i have asked about total maturity after inflation consideration for PPF last conversation, because i don’t know the calculation, and even though online PPF calculator has also no any inflation option.

            I want to just clear the maturity comparison for both. Because now we have to pay 10% on LTCG, although 12% is not guranteed, and god knows for next 15-20 yrs, how Mr. Jaitely will change this theory, ofcourse it will not salutary for us.

            So, when someone going to invest his money after considering long horizon, they must know the situation.

              1. Quite True!!!

                But, its not floating as much as others.

                It’s floating 0.1-0.5% i think as per historical statements.

                1. Kindly explain below statement!!!, how it will affect me if i am going to Equity for a Long Time????

                  The additional amount you need to invest to build the desired corpus goes up significantly, with longer holding periods. This is because the impact of a 1% cut in returns on account of LTCG tax gets significantly higher with longer investment periods due to the impact of compounding.

                2. Paras-When you compare quarter on the quarter basis or year on year basis it may fluctuate within the range of 1%. But if you check 10-15 years back history to today, then the fluctuation is more. Forst compares the product which falls under same asset category. Second, consider inflation to all products to arrive at your decision. You consider the average return of PPF as 8% or even at 7% and calculate the same way like what you did with equity.

    1. There is something terribly wrong with this discussion.
      Whether you invest in Equity MF or PPF, there is going to be inflation over the next 15 years and it can be anything.
      Next, since you have assumed that MF is going to return 12% and PPF 7.8% MF is obviously going to give you a bigger corpus if same amount is invested into each product because of the higher returns assumption of MF. No need to use calculators to figure this out.
      Finally, 10% tax on gains will reduce MF gains but the MF corpus will still be much higher than PPF (MF is assumed to give 50% more returns than PPF!!!).

      So whats next?
      Try to invest in products which will maximize your final corpus with proper asset allocation which will incidentally involve investments into both MF and PPF.

        1. Respected Mr.Basav, why you are not telling Mr. Paras this simple thing that, with inflation, for MF as per him will be calculated as (12%-6%inflation =6% growth)
          And for PPF, it will be (7.8%-6 %inflation=2.8% growth)
          It is very simple to simply show the right way rather than confusing someone new as showing off your knowledge. This mindset is very bad for everyone both for you and your reader.


            1. He just calculated on online calculator, where inflation option was available to just tick for the MF. He just ticked the option with partial clarity. But did not have an option of subtracting inflation during PPF. Online calculator is a easy tool where he need not clarity, just to put the values and tick the option. Most probably he is not aware of the clarity of the calculation, he just put the values and get the results.

  16. Basu,

    Thank you for such an insightful article. You have always been a mentor with ease of understanding.

    Now please don’t take my below query as pressing “PANIC” button, but this is just for my understanding purpose.

    Let’s say after 31st Jan 18 one has a capital gain of more than 1 lakh for his portfolio (which may compromise of multiple mutual fund schemes). Now if the user “redeems” the units before 31st March 2018 (considering the NAV will be greater than original NAV as on 31st Jan 18) shall he/she be entitled to pay LTCG @ 10%? Will it be a good idea to sell-off and then invest post 1st Apr 2018, thoughts?

    Thank in advance.

    1. Ashish-As I pointed above, you no need to pay any tax if you redeem before 31st March 2018 and there is any LTCG. Booking for the sake of LTCG as per me, is not a good idea as it hardly a matter of less than 1% effect on your investment (if you are long term investor).

      1. Thanks for the prompt response and clarification.

        I do agree that one should not sell if the investment goal is really long term(10 yrs.) or so.

        However, there might be investors who are near to the goal say 5 yrs OR investors with huge portfolio gains. For them 1% would be a big amount.

        What strategy would you advise in above scenario? One can redeem all and than start off a STP into equity funds or something else?

        1. Ashish-The way you face when you are about to reach the goal is same as of those whose goal is now near NOW. The situation of investors who NOW have huge portfolio is also same when you are about to reach the goal. If you do not worry to pay 1% LTCG on that time, then in what sense it worries NOW? 10% LTCG worrying more many of us because by birth we have some rigidity in NOT TO PAY TAX.

          1. Basu,

            Appreciate your response. My query for not pertaining to any worry or panic. If one is entitled to pay taxes one should respect and pay it.

            However my original question is still unanswered. As an investor one needs to know the strategy to handle such scenario. It’s not a matter of 1% or even Rs. 1000. If one can save its a good saving.

            So I’m hopeful if you can suggest the best alternative approach of there is one.

            NO saying that we always tend to hide out more than it’s actual.

            1. Ashish-The best option is to invest for long term, choose the way where the cost is less, reduce your expectation for around 1% for your expectation for long term goals and invest 1% higher than the earlier to achieve the goals.

              1. Thank you Sir and much appreciated! Yes, one needs to design less expectation with a/c to inflation and keep increasing the investment as one suits needs.

  17. There are two options for investment in mutual fund. (1) Dividend pay out and (2) Growth option. I think there is no distribution of dividend in option (2). Prift (dividend earned by the investor is re-invested in the relevant scheme and as such DTT may not be applicable in respect of dividend income received from investment made in growth option. Kindly clarify whether LTCG is attracted in respect of investment made under option (2) Growth option.

  18. Hello Basavaraj,
    I regularly follow your blogs and let me thank you for your efforts and to educate us all.

    I could not quite agree with your statement “However, those who invested for BETTER long-term real return, they no need to worry.”

    For example , I had planned for my Retirement Corpus planned out of 25 years of monthly SIP worth Rs.50000 @11% compounded per annum from this year onwards.
    Please refer below calculation
    1) Amount invested 600000 per year for 25 Years= 1,50,00000
    2) Interest accumulated at the end of 25 Year = 5,76,73057
    3) Total Value = 7,26,73057
    Retirement Corpus (Before Budget 2018)
    Total Amount :7,26,73057 (no Tax)
    Retirement Corpus (Effective 2018 onwards) considering 25 years of continuous SIP investment
    Total PreTax Corpus = 7,26,73057
    LTCG Tax = (5,76,73057 – 100000) * 10 % i.e. 57,57305
    Total Amount = 7,26,73057 – 5757305 = 66915751
    Due to this there will be a BIG DENT of about 8% in my Retirement Corpus.
    So indeed this is big cause of worry.

    The government should have atleast considered Indexation benefit for long term investments of atleast 5 Years.
    That too the 10% LTCG Tax has been mentioned as CONCESSIONAL, this means that going forward this could increase.

    So this is a big cause of worry : (,
    Below are my few queries if you could clarify them out.
    1. In the above example , don’t you think that that the 100000 cover for LTCG to be variable for various years of investment.
    2. Is there any good alternative to save Tax from my planned retirement corpus model with similar return.
    3. You mentioned in the the Expense Ratio of AMCs will cover the overall LTCG load.
    But will all things remain same dont you think AMCs will be forced to increase the expense ration ?

    Note : My Retirement Corpus includes some debt component, however not included for the sake of simplicity.
    My SIP plan for Retirement Corpus actually considers increment of 5% every year, however excluded that for the sake of simplicity and ease of calculation

    Many thanks in advance

    1. Avindhan-Check the monthly compounding. The future value with Rs.50,000 per month SIP and for 25 years with 11% return expectation will be Rs.7,88,06,665. Now the invested amount is Rs.Rs.1,50,00,000. The gain is Rs.6,38,06,665. LTCG on this after deducting the gain of Rs.1,00,000 tax-free, then the tax will be Rs.63,70,666. Hence, the net amount post tax available for your retirement is Rs.Rs.7,24,35,999. Now you are considering the return 11%. If we consider this tax outgo, then the effective rate of return for you is NOT 8% (I don’t know how you calculated), but 10.51% a marginal 0.49% of effect on your overall return. Do you still feel because of this 0.49% effect, you stay away from equity? If you want to play safe, then reduce your expected return to 10% rather than earlier 11%. That resolves your FEAR of LTCG.

      1. Hi Basavaraj,
        Many thanks for your reply.
        Below are some points :-
        1. I used the below compound interest calculator to arrive upon the figures :-

        Base amount: 0.00
        Interest Rate: 11%
        Effective Annual Rate: 11%
        Calculation period: 25 years
        Compounded : Annually

        Kindly advise if there is a better calculator that the investors should use.

        2. The 8% mentioned is basically the loss in Retirement Corpus with LTCG in place.
        i.e. There is 8% loss from my earlier calculatation 7,26,73057 (without LTCG) to 66915751 (now wth LTCG in consideration).

        So effectively, I need to invest more in SIP in order to arrive upon my earlier expected Retirement Corpus.

        Once again many thanks for your guidance and providing knowledge to all of us.

        1. Avinandhan-1) There may be some differences. Let us leave that.
          2) You are assuming wrongly. Think the way I calculated.
          You just have to revise your expectation from earlier 11% to 10% to set off this new tax.

  19. The main issue is not that stocks and mutual funds are subject to LTCG but 10% rate is bit too harsh specially when it is not subject to benefit of indexation. Also STT stays!

    The final LTCG amount at the time of withdrawal may cost more than 10% to the investor. (if he churns his portfolio at frequent intervals – say once in 2-3 years (which was hitherto exempt) The final outcome would be much worse after 20 years.)

        1. So no portfolio churning after 1 year is the only solution it seems to generate decent returns!!!

          And hence one should invest through Mutual fund route instead of buying and selling through brokers.

          Is it correct strategy?

          1. Ritesh-Portfolio churning required only when you have to do asset allocation or to come out from the underperforming product (both during portfolio review but NOT during each up and down of market). What I am trying to say is that these ups and downs are part and parcel of the equity market. Now regarding investments through brokers, in case of MF, there are two ways (direct and regular). It is purely based on your capability to choose.

  20. Hi Basu,

    Another query

    Suppose I have 2 lakhs as profit on my mutual funds for this year. I do not redeem the one lac tax exempted profit. The next year the profit is again 2 lakhs, now the total profit for two years is 4 lakhs. Will that profit of the last year be carried forward. That means, will I have to pay 30k as tax.

    In the same scenario, If I decide to book the profit of one lakhs in the first year, the profit which would be carried forward to the next year would be one lakhs, and combining with 2 lakhs, the profit is now 3 lakhs. What would be my tax liablity here, 20k. If this is the case, would you recommend booking one lakh profit each year to minimize tax liability?

    1. Kailash-Taxation in mutual funds will come into picture when you withdraw money (irrespective of whether you have gain or loss in last year or this year). Booking Rs.1 lakh profit and re-investing again may be good. But tracking for taxation purpose may be the biggest headache as your portfolio grow.

      1. Well, I did some calculation and reinvesting the money on the same NAV had no impact on the tax thing. I both the cases, the tax would be the same. I guess the best strategy is to remain invested, not to worry about the tax and let the profit compound in the long run. Am I right?

  21. If I buy MF units for 10L(2018) and after 5 years i withdraw(2023) for 20L, my capital gain would be 10L for all the 5 years, so should I pay 10 percent of 10L i.e 1L as tax in 2023 ? Or would it be capital gain only of the year 2022-2023
    Would it be deducted at source, or should we manually pay in IT website ?

    1. your tax would be applicable whenever you make the withdrawal. i. e. in your case 10l-1l which is 9 lac. Ten percent of 9 lac is 90k. Your tax liability is 90k.

  22. Sir if in next budget the taxation of previous years are applied will I have to still pay tax on gains made during this present year?

  23. Dear Mr. Basavaraj.

    My doubt arises on the calculation of LTCG tax on the investment which was made before 31st Jan 2018. Taking the reference of the example portrayed in the second table of your blog. According to me tax should be calculated as follow.

    Note : Reference of Cost of acquisition taken from the given below provision.
    “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 (which is Rs 100); and
    (ii) the lower of—
    (a) the fair market value of such asset (which is rs 120); and
    (b) the full value of the consideration received or accruing as a result of the transfer of the capital asset (which is rs 150).”
    { Higher of 100 and 120 (lower of 120 and 150)} is equal to 120.

    Sale consideration = Rs 150000o (1000o*150)
    Less : cost of acquisition = Rs 120000o (100o0*120) { Higher of 100 and 120 (lower of 120 and 150)}
    LTCG = 30000o (150000o-120000o)
    LTCG Tax = 3000o (30000o*10%) excluding cess

    Please rectify me if my calculation is not according to assumptions made by you. Please give the clarification for the same.

  24. Hi

    One question

    Suppose in the middle of the financial year, my gain on Mutual fund portfolio is 2 lac and I redeem a part of it and reinvest it and at the end of the financial year, the profit is 50 thousand. Will I have to pay LTCG in this case?

  25. Dear sir if I want to invest 10000 rs.per month through sip for 5 years. It may be return after 5 years more than 2 Lakh. It is under LTCG. But can I invest it fund 10000 in no. of 5 sip and every sip 2000 per month?for save LTCG.

  26. 1 silly question- Example- I invested 10 lacs and that is now 15 lacs. So, in this financial year i have to pay tax on 4 lacs i.e. 40K. And in next year my investment will become 8 lacs which was 10 lacs(invested amount) . So, i paid tax for nothing? or it is only when we redeem amount

      1. So, if i invested 10 lacs in 10 years and get 20 lacs after 10 years(10 lacs interest in 10 years). In this situation , i will not give any tax?

  27. Suppose i 2016 I bought MF at Rs 50 per unit. On 31-Jan-2018 the highest price of this MF was Rs 60 per unit. Now I sold this fund in let us say 2021 (so long term) at price of Rs 55 per unit. As per my understanding this will have to be shown as a loss in income tax return (60-55 = Rs 5 per unit) but actually I have made profit of Rs 5 which I have got in bank.

    I don’t think this scenario being covered anywhere by anyone. Please help me with this one. It is hypothetical but we should cover all scenarios.

  28. sir i have a corpus of 10,00,000 ,which i planning to invest in few mutual funds (balanced,large cap,multi cap, small and mid cap)and in existing sundaram rural India fund.after one year i wish to redeem around 8 % yearly across my portfolio through SWP .As, LTCG is now came in the picture,,i want to know that if my redeemable value is less than rs 100000 yearly, can i escape from being taxed @ 10% on withdrawal money

  29. As now there may be difference in the total long term capital gain and the long term capital gain (as calculated for taxation purposes due to Grandfathering Clause) . Shall we require to show both these amounts of LTCG in income tax returns ( one portion under exempted income and taxable portion in non exempted income) or only the taxable portion.
    2. Should Long Term Capital Loss be compensated against total long term capital gain or it can be compensated against taxable portion of long term capital gain thereby reducing the effective long term capital gain and hence the tax.

      1. Let us assume, Total LTCG = Rs. 2 lacs, Taxable portion of LTCG = Rs. 1.5 lacs (due to Grandfathering Clause)
        Total LTCL=Rs. 50000/-. So does that mean this can be set off with Taxable portion of LTCG and effective taxable portion of LTCG will be Rs 1 lac only and hence no tax payable in this case. Please confirm.

  30. Hi Basu,

    One question

    Suppose I made a profit of 120000 on my funds in a particular year. After completing one year, I decide to redeem one lac out of it. Now my profit for the second year is only 20000. How will LTCG be applicable here as my profit is only 20000 for the second year, LTCG cannot be carried forward to another year I guess

    Another thing, If somone opts for this route, will the compounding factor be hurt in the long run?

  31. Thanks basu for last reply
    I want to know one more thing if my taxable business income is 150000 and i earned short term gain 100000 and total income 250000 is it will be consider as per tax slab tax free income or i have to pay 15% tax on short term gain that is 15000.

    1. Maan-If your residential status is Resident Indian, then in your case the total tax liability will be ZERO. The LTCG can be adjusted against basic exemption limit only after adjusting all other income.

      1. In case short term gain it will be same remaining tax
        Free if short term gain is 150000 and business income is 100000 total 250000

          1. Basu sir one more question .
            With thanks
            In case i earn short term gain 200000 and business income 200000 in this case total income 400000 now on (400000-250000(tax exemption slab wise)=150000) now 150000 amt tax will be payable at 5% or 15% as per short term gain

            1. Maan-I think you not read my words properly. You have to first adjust your other sources of income to Basic Exemption Limit (Rs.2,50,000). Once that it is over, then only you can consider LTCG. Hence, the tax on Rs.1,50,000 will be 15% but not 5% as you assumed.

  32. Hi Basu , How calculating LTCG / STCG in MF , taxation applicable if fund manager sales the stocks .Hope this will reflect in MF fund NAV .If i redeem after year has to pay LTCG .Is looks like double taxation . Could you pls clarify .Thanks . Arun

      1. Good point Arun. If the fund manager’s stock transactions are taxed, then the NAV will have to reflect that. And further it becomes double taxation at the investor’s end. If this is true, investing in MF is looking more and more futile.
        Basavaraj – Do you have any updated insights on this?

  33. I believe that taxation comes into picture only if you are redeeming/selling mf units/stocks. But supposing you are just paying your sip for a long term plan and not thinking of withdrawal in near future, how does it affect? Maybe after some years down the line there may be a different tax rate/ method of taxation etc?

  34. Hi Sir,

    Will it make ULIPs more attractive now since there seems to be no tax on it?

    Also, limited number of switches during the year also do not attract tax.

    Is it true?

    Please explain


      1. Thanks for reply.

        However, imagine a scenario where an individual starts investing through SIP of Rs. 10,000/- for 20 years. He generates a corpus of Rs. 1 crore @ 12% after 20 years.

        So will he require to pay tax @10.40% on Rs. 75 Lacs? (1 crore – 24 Lacs (SIP) – 1 Lac (exempt amount)?

        At Rs. 7.80 Lacs, LTCG amount looks very high in this case!!!

          1. And even a million such investments would bring a staggering Rs. 78,000 crores of LTCG to the Govt’ kitty. (of course after 20 years). These are only SIP

            Other methods such as Dividend schemes and SWPs are not considered here!!!!

  35. Hey, one question is the LTCG taxed on each mutual fund separately or on the entire portfolio?

    Example, A person has 4 mutual funds and he has 90K profit for the year in first two mutual funds and 120000 profit in the other two. His entire portfolio profit is 420000 for the year. Will he have to pay the LTCG on 420000-100000 or on each fund separately?

          1. why would someone redeem such massive profit and pay exorbitant tax, unless there is an emergency. i think partial profit booking of 100000 yearly will be better option

  36. The expected return from equity is 12% for long term goals .
    LTCG is 10%
    So the real return will be 10.8%.
    Should i reset my expected return from Equity to be 10.8% for all the goals in calculator to find the required Monthly SIP amount for all the goals which i am currently investing.

    Kindly clarify whether my above calculation is correct.

    Second query, Even for rebalancing Equity to Debt annually will attract the LTCG tax 10%.
    To minimize the tax outgo, Any rebalancing strategy to be followed.

      1. Thanks Basu,

        Once i reset the expected return as 10.8%, then all my SIP amount will be increased more.

        What is your opinion on Low cost Index funds like ICICI pru Nifty next 50 instead of Actively managed funds.

        At least in the long term, the ER will be considerably saved compare to active managed funds. Just my idea to think about Index funds.

  37. I bought SBI Magnum Gilt LTP for Rs.3lakhs in 2015… It is showing value of 3,90lakhs now… What will be LTCG implication in my case?

  38. I purchased 1000 shares @55 on 14 june 2017 and as on 31 jan 2018 the price was @47 and after 1 year if i sold at 80 rs than how the long term calculation will be done

    1. Maan-I can’t calculate for each individual. Refer above image and you can easily calculate on your own. But in your case it is the LOSS, I will explain you as below.
      Higher of a) b)
      a) Actual Cost Rs.55.
      b) Lower of the below.
      -Highest Price or NAV as on 31st Jan 2018 Rs.47
      -Actual Selling Price Rs.80.
      So higher of a) or b) is obviously Rs.55.
      So LTCG @10% will be (1000*Rs.80)-(1,000*55)=Rs.25,000 which is less than Rs1,00,000. Hence, no LTCG applicable in this case.

  39. Hi Basu,
    If i purchase 5 mutual funds and in each if the profit is Rs 99000 ,then if redeem all the funds then will there be tax implications?
    Tracking is based on folio wise or based on PAN.

    1. Sridhar-For capital gain taxation, only two things matter. Holding period and the profit. Hence, whether you invested in one fund or 100 funds, what matters at the end is how will be the capital gain within that financial year and whether it is LTCG or STCG.

  40. Suppose, I buy 1000 units of equity mf @ 100 rs each i 2018, and after 10 years in 2028, I redeem it @ 500 rs each. What will be the tax applicable at redemption??

    1. Doctor-I hope you purchased after 1st Feb 2018. In this way, your gain will be Rs.4,00,000. So the tax will be Rs.30,000 on Rs.3,00,000 (Whole Rs.4 lakh will not be taxed as the LTCG applies on over and above gain of Rs.1 lakh).

  41. LTCG on equities will only on the redemption of units, or it will also be there if there is growth but I dont redeem it?
    For example, I bought a 1000 units of 100 rs each. after first year, the unit price increase to 200 rs, but I dont redeem it. In second year the price decrease to 100 rs again. Then in third year, the price again inctease to 200/ unit, and I redeem it, what will be tax applicable for all 3 years, in that case??

  42. Basu,
    You calculation in above table where you have mentioned LTCG of 10% of 1,2o,000-1,00,000 = 20,000 is wrong.
    The buying cost will be 120 (as on Jan 31) and selling price is 150. So the LTCG will be 10% of (150-120) for 10,000 shares will be 30,000.

    1. Pradeep-I think you forgot that this LTCG will apply for the gain which is over and above Rs.1,00,000. Hence, we have to deduct Rs.1,00,000 from the gain. After that 10% for the remaining Rs.2,00,000 but not on whole Rs.3,00,000 (as per you).

  43. Hi Sir,

    Thanks for the explanation. I want to know If I have a profit of over one lakhs in mutual funds and I redeem them before one year, uspar toh stcg lagega 15 percent. What is the use of booking profit then?

            1. another thing btw, whatever gain I have on my funds till 31 jan, that will be tax-free. Will that remain tax free in the future too. I mean it will compound in the future, then will it fall under ltcg?

  44. Dear Basu Sir,

    I have SIP in Equity MF running from last 6 years, with specific goal based investment and for a planned duration of 20 years. Kindly explain what is the impact of LTCG on these if i continue and if i exit. Kindly explain which is better?


  45. Sir Say I have 3 mutual fund X Y Z.Investment amount is 100000 in each M F.Now my total investment amount increased to 199000 in each MF after 1 year (ie 199000for X,199000 for Y…..total portfolio amount is 597000 rs). I want to redeem my whole MF now.Shall I be taxed…..
    Waiting eagerly…….

      1. If I redeem whole on April 2019 my portfolio amount remain same ie 199000 rs for each MF.Shall I be taxed then….

  46. Great explaination, but you miss 12÷ surcharge + 4% cess (which was 3% before budget. So actual tax amount will be higher than 10% or i am wrong.

      1. I feel that 10% tax for people who are investing for long term for example for retirement Corpus will be very high. That too inflation is not taken into account.
        Also, there is this burden on investors to calculate tax on sip amount invested for each Month.(after one year is passed). I hope mutual funds companies gives this tool so that investors are not troubled.

  47. They could have deducted tax while selling with the broker, instead of troubling the investor with the calculation while filing returns. Meanwhile, a leader of the jhumla party had boasted before elections that they might scrap income tax 🙂

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