on Long Term Capital Gain
(LTCG) on Equity Shares & Mutual Funds -
(Section 112A of The Income Tax Act
- applicable from AY 2019-20)
shares & equity mutual
funds are sold/redeemed after 12 months
of their holding, the gain on such sale/redemption is known as Long
Term Capital Gain. Earlier to assessment year 2019-20 this long term capital gain was
exempt from tax but from 1st April 2019 such long term gains are being
brought into income tax net.
provisions relating to tax on Long Term Capital Gain on Equity Shares,
Equity Oriented Mutual Funds and unit of a Business Trust are inserted
by Finance Act 2018 and
covered by Section 112A of The Income
Accordingly Long Term Capital
Gain on equity shares
& equity oriented mutual funds & units of a business trust, if
exceeding Rs. 1.00 lac; is
chargeable to tax at a flat rate of 10%.
Detailed provisions of
the Section 112A relating to tax on long term capital gain on sale/redemption of equity shares/mutual funds:
- Provisions of Section 112A are applicable from
Assessment Year 2019-20 (Previous Year 2018-19)
- Section 112A is applicable when
there is Long Term Capital Gain on sale/redemption of
Equity Shares & Equity Oriented
Mutual Funds & units of a business trust. Here clear emphasis is on
Equity Shares & Equity
Oriented Mutual Funds. Other Mutual funds like debt funds, Gilt funds,
FMPs etc. are not covered by this section.
- The transaction shall be chargeable to
Securities Transaction Tax(STT). One can check the
details of STT from the mutual fund transaction/redemption document.
- Total Long term gain from sale/redemption of Equity
Shares & Equity Oriented
Mutual Funds is more than one lakh rupees( Rs. 1.00 lac).
- If the above conditions
are satisfied, Long term capital gain will be taxable at
a flat rate of 10%.
to Calculate Capital
Gain on sale/redemption of Shares &/or Mutual Funds-
Calculation of Capital
Gain in case of sale of shares/mutual funds is a bit different as cost
of acqusition of such shares/mutual funds is calculated as per the
newly inserted provisions of Section 55 of The Income Tax Act.
Accordingly cost of Acqusition in cases when shares/mutual funds are
acquired before 1st February 2018 shall be -
Higher of following two -
- Actual cost of acqusition of such shares/mutual funds
- lower of -
- Fair market value of such shares/mutual funds on
31st January 2018 and
- Full value of consideration of such shares/mutual
funds received/accruing on sale/redemption/transfer.
After computing the cost of acquisition as above capital gain shall be
calculated as follows-
|Full Value of
consideration on sale/redemption/transfer
|Less Cost of
Acquisition as computed above Under Section 55 of IT Act
|Long Term Capital
Gain on Equity Shares/Mutual Funds/Units of Business Trust
to Calculate income tax when total income includes Long Term Capital
Gain on Shares &/or Mutual Funds?
total income of a person is taxable as per the applicable slab rate but
LTCG on equity shares & equity oriented mutual funds will be
taxable at a flat rate of 10%.
The methodology to calculate tax when
total income of a person includes LTCG on shares & mutual
funds is explained below:
- Calculate tax on Long Term Capital Gain on
Equity Shares & Equity Oriented Mutual Funds @ 10%.
- Now calculate tax on balance income as per
normal tax slab rate applicable as if it is the total income.
- Add both the taxes calculated as above,
& this is your total tax liability.
- Benefit of Chapter VI A
deductions(ie. Section 80C deductions relating to investments in PPF,
LIC, PF etc.) is
not available from LTCG on Equity Shares & Equity
Oriented Mutual Funds. Means if your only income is Long term capital
gain from shares, you will not be eligible for any deduction under
Section 80C for tax savings investments.
- In cases where total income(excluding LTCG) is
less than the exemption limit, LTCG will be reduced by the amount by
which total income falls short of exemption limit.
the benefit of setting off LTCG to the exemption limit is given,
but the LTCG remaining after exausting the exemption limit will be
taxable @ 10% & not at the applicable tax slab rate.
- Indexation benefit is not applicable for calculating
LTCG on sale/redemption of Equity Shares, Equity oriented Mutual Funds
and units of a business trust.
Have a query or a feedback! Write to us at email@example.com
or through Contact us.
to calculate STCG on shares & mutual funds?
Gain on sale of Bonus Shares
are Equity Oriented Mutual Funds?
Cost Inflation index for
to calculate LTCG & Indexed Cost of Acquisition
term capital gain on sale of house property-how to save
exemptions under Income Tax Act from LTCG