InvestorQ : Can you explain the calculation of the LTCG tax? I am not very clear with it.
Ira Shah made post

Can you explain the calculation of the LTCG tax? I am not very clear with it.

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Suresh Patil answered.
2 years ago
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LTCG or long-term is a type of capital gains, which is a tax levied by the Indian government on any profit or gain made on a capital asset. This is because the gain made is considered income and hence becomes taxable according to Indian taxation rules. Capital gains is different for immovable properties and for stocks/bonds. Here we will only discuss the capital gains levied on stocks and bonds. The LTCG tax is levied at 10% on the gains in excess of Rs. 1 lakh without the benefit of indexation. For the calculation of LTCG, moneycontrol has a very useful explanation with the help of various scenarios: Scenario 1: An equity share is acquired on January 1, 2017, at Rs. 100, its fair market value is Rs. 200 on January 31, 2018 and it is sold on April 1, 2018 at Rs. 250. As the actual cost of acquisition is less than the fair market value, as on January 31, 2018, the fair market value of Rs. 200 will be taken as the cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 250 – Rs. 200). Scenario 2: An equity share is acquired on January 1, 2017 at Rs. 100, its fair market value is Rs. 200 on January 31, 2018 and it is sold on April 1, 2018 at Rs. 150. In this case, the actual cost of acquisition is less than the fair market value, as on January 31, 2018. However, the sale value is also less than the fair market value, as on January 31, 2018. Accordingly, the sale value of Rs. 150 will be taken as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150). Scenario 3: An equity share is acquired on January 1, 2017 at Rs. 100, its fair market value is Rs. 50 on January 31, 2018 and it is sold on April 1, 2018 at Rs. 150. In this case, the fair market value, as on January 31, 2018, is less than the actual cost of acquisition, and therefore, the actual cost of Rs. 100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs. 50 (Rs. 150 – Rs. 100). Scenario 4: An equity share is acquired on January 1, 2017 at Rs. 100, its fair market value is Rs. 200 on January 31, 2018 and it is sold on April 1, 2018 at Rs. 50. In this case, the actual cost of acquisition is less than the fair market value, as on January 31, 2018. The sale value is less than the fair market value as on January 31, 2018 and also the actual cost of acquisition. Therefore, the actual cost of Rs. 100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs. 50 (Rs. 50 – Rs. 100) in this case.
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