InvestorQ : How did Budget 2018 make a big difference to LTCG tax calculation on equities and equity mutual funds?
Nisha Chandani made post

How did Budget 2018 make a big difference to LTCG tax calculation on equities and equity mutual funds?

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2 years ago
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The Union Budget 2018 has added a new dimension to the aspect of capital gains tax on equity mutual funds. One of the big attractions of equity mutual funds was that the long term capital gains were entirely tax free. The Union Budget 2018 has now imposed tax on long term capital gains if the total capital gain in the financial year exceeds Rs.1 lakh. The capital gain in excess of Rs.100,000 during the year will attract tax at the flat rate of 10%. This limit of Rs.1 lakh is the overall blanket limit for all equity related capital gains arising from shares, equity funds, balanced funds, arbitrage funds etc.

Of course, there will also be the surcharge of 4% making the effective tax rate 10.4%. What also needs to be remembered is that there is no benefit of indexation available. For example, if you hold the shares or the mutual funds for a period of 7 years you still will not get any benefit of indexation and have to pay tax at the total capital gains above the threshold of Rs.1 lakh. The definition of capital gains is still holding period of more than 1 year. But, irrespective of whether the LTCG arises after 1 year or after 5 years, the tax on LTCG has to be paid at a flat rate of 10% where the LTCG exceeds Rs.1 lakh per year.
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