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.
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.
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.
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??
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View Comments
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?
Regards,
Amar
Dear Amar,
It is long term capital loss. You can set off the same if you have any LTCG for the said financial year.
Thank you very much sir for your quick reply. Very much appreciate your blogs and responses to user queries..
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.
Dear Cherian,
You mean to say products offered by Life Insurance companies? If so, then yes the benefits are tax free.
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.
regards
Rajeev Shukla
Rajeev-It is hard for me to calculate for each individual.
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.
Rajeev-CII post is there in my blog. However, there is no calculator. You can use the IT portal for the same.
I am looking for Property LTCG for 2018
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
Hi Basu
I have one question ,Is LTCG applicable for ELSS?
Can you explain?
Chandu-Yes. Because they are also considered as equity funds. ELSS funds have special tax status only during investment but not during redemption.
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
Swaminathan-If your dividend income beyond Rs.10 lakh a year, then the 10% dividend tax will be applicable on that amount which is in excess of Rs.10 lakh.
Thankyou Sir for your Prompt reply. i think the AMCs are confused and they are not clear on this issue.
regards
Swaminathan
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?
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.
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.
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?
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.
Thanks,
Raghu
Raghu-Hard to say BLINDLY with mere few lines of sharing.
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!!
thanks,
Siva.
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.
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/-
Thanks,
Siva
Siva-If your total gain in that FY from equity investment is just Rs.20,000 then there will not be any tax. Regarding funds, hard to say anything BLINDLY.
One more, I have started MF-SIP one year before...
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
Hari-It is per PAN for the financial year.
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
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.