Long term capital gains, what actually is the impact?
One advantage for investors who have invested before Jan 31, 2018 is that the market value of investments as on Jan 31, 2018 will be considered as Cost of Acquisition for calculating LTCG instead of the Actual Cost at the time of purchase (Scenarios 2 & 3 of the above table explains the benefit of this clause). If the market value of investments as on Jan 31, 2018 is less than the Actual Cost of acquisition, the Actual Cost will be considered for calculating LTCG ( Refer Scenario 4 in the above table).
As a long term investor, you should not be worried about the Long Term Capital Gains tax. If we take scenario 3, the tax payable on the redemption amount of Rs.8,00,000 and Capital Gains of Rs.1,50,000 is Rs.5,000/- which is 0.63% on redemption amount and 1.67% on Actual Gains (Rs.3,00,000 = Rs.8,00,000 - Rs.5,00,000) respectively.
After the re-introduction of the LTCG tax, it makes more sense for investors to focus now on choosing right funds that meet their investment objective which will help them achieve their financial goal over long term.
The Central Board of Direct Taxes (CBDT) has issued 24 frequently asked questions (FAQs) on long term capital gains (LTCG) taxation on equity shares proposed in the recent Union Budget. Click here to know more
So irrespective of taxation , equities have a potential to grow and it is advisable to be invested in this asset class for long term.
* The 4% Health & Education Cess will be applicable on the tax amount and not on the gains. So taking Example 3 ahead - the Cess will be applicable on the tax amount payable (Rs. 5,000) and not on gains (Rs. 50,000). Surcharge willbe applicable based on the level of income of the investor.