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Long-term capital gains - Budget 2018-19

Budget - By: - CA DEV KUMAR KOTHARI - Dated:- 2-2-2018 - Budget 2018 proposals: Long-term capital gains on shares and Equity oriented funds-proposed provisions are full of complexities -difficult to ensure compliance by taxpayers Simplification is far distant dream: Simplification of tax provisions is very much required to ensure correct and full compliance. Many times taxpayers delay filing of return due to complexity of law and wait for authentic clarifications. Even after clarifications , it .....

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d revised tax scheme of taxing capital gains were introduced for simplifications. These included for example, provisions of STT, exemptions and concessions in section 10 and 111A, 112 respectively and some other provisions of the Income-tax Act, 1961 like Section 14A. The readers are well aware of complexities created by these provisions this is because, tax authorities are in habit of not considering objective and purposes of such simplifications. Some provisions may benefit to taxpayers becaus .....

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f capital gains and also about applicability of the provision. How taxpayers can understand and comply such complex provisions. Particularly small tax payers who may have slightly higher than Rs. one lakh of long term capital gains on transfer of shares can be expected to understand such complex provisions? When government intend to ensure compliance by taxpayers and to accept most of Return of Income filed, it is very much essential that the provisions should be clear, simple and without ambigu .....

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be tax neutral because rate of tax on book profit (which may includes LTCG) is higher than 10%. New proposed S.112A is very complex. The proposed section is reproduced below with highlights added by author to indicate important and complex: From THE FINANCE BILL, 2018 31. Insertion of new section 112A. After section 112 of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2019, namely:- Tax on long term capital gains in certain cases. 112A. (1) No .....

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nance (No.2) Act, 2004 (23 of 2004) has,- (a) in a case where the long-term capital asset is in the nature of an equity share in a company, been paid on acquisition and transfer of such capital asset; or (b) in a case where the long-term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, been paid on transfer of such capital asset. (2) The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of- (i) .....

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, the long-term capital gains, for the purposes of clause (i), shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax. (3) The condition specified in clause (iii) of sub-section (1) shall not apply to a transfer undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transfer is received or receivable in foreign currency. (4) The Ce .....

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uired by the assessee before the 1st day of February, 2018, shall be deemed to be the higher of- (i) the actual cost of acquisition of such asset; and (ii) the lower of- (a) the fair market value of such asset; and (b) the full value of consideration received or accruing as a result of the transfer of the capital asset. (7) Where the gross total income of an assessee includes any long-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gr .....

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invests in the units of another fund which is traded on a recognised stock exchange,- (A) a minimum of ninety per cent. of the total proceeds of such fund is invested in the units of such other fund; and (B) such other fund also invests a minimum of ninety per cent. of its total proceeds in the equity shares of domestic companies listed on a recognised stock exchange; and (ii) in any other case, a minimum of sixty-five per cent. of the total proceeds of such fund is invested in the equity shares .....

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ded that where there is no trading in such asset on such exchange on 31st day of January, 2018, the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value; (ii) in a case where the capital asset is a unit and is not listed on a recognised stock exchange, the net asset value of such asset as on the 31st day of January, 2018; (c) International Financial Services Centre sha .....

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includes any income chargeable under the head Capital gains , arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, subject to the conditions specified under the section, the tax payable by the assessee on the capital gains exceeding one lakh rupees shall be calculated at the rate of ten per cent. It is further proposed to provide that in the case of an individual or a Hindu undivided family .....

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