Example 5
Mr. J bought equity shares on 13th Nov, 2010 for Rs. 12,000. FMV of
the shares was Rs. 30,000 as on 31st Jan, 2018. He sold the shares on
11th May, 2019 for Rs.25,000 What will be the long-term capital gain/
loss?
Cost of Acquisition (COA)
Higher of –
Hence, COA = Higher of (Rs. 12,000 or Rs. 25,000) Rs. 25,000
Capital Gain/ (Loss)
Given below is further analysis of the LTCG implications of
certain other scenarios which will help understand the proposed
amendment better:
Sl No | Scenario | Tax Implications |
1 | Purchase and sale before 31/1/2018 | Exempt under Section 10(38) |
2 | Purchase before 31/1/2018 Sale after 31/1/2018 but before 1/4/2018 | Exempt under Section 10(38) |
3 | Purchase before 31/1/2018 Sale on or after 1/4/2018 | LTCG taxable Gains accrued before 31/1/2018 exempt Capital Gains computed in the manner as discussed above |
4 | Purchase after 31/1/2018 Sale on or after 1/4/2018 | LTCG taxable Capital Gains computed in the manner as discussed above |
Note: The above table has been prepared with a presumption that all gains are long term.
LTCG on the transfer of bonus and rights shares acquired on or before 31 January 2018
The LTCG for these shares shall be calculated by considering the FMV on
31st January, 2018 as the COA of such shares thereby exempting gains
until 31st January, 2018 from tax.
Carry forward of Long-Term Capital Losses ("LTCL") on sale of such shares
The income tax department has vided its FAQs dated 4th February, 2018
and clarified that LTCL resulting from a transfer made on or after 1st
April, 2018 will be allowed to set-off and carried forward under the
existing provisions of the Act. Therefore, it can be set-off against any
other LTCGs and unabsorbed LTCL can be carried forward to subsequent
eight years for set-off against LTCG.
Rebate Under 87A
There is also a proposal to allow the deduction under Section 87A of
the Income Tax Act on income tax computed on all income, excluding the
income tax payable on such LTCG.
For more information on this, visit TAXAJ
Posted by Aashima
Team TaxaJ