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Frequently Asked Questions (FAQs) regarding taxation of long-term capital gains proposed in Finance Bill, 2018-reg.

Budget - Dated:- 5-2-2018 - F. No. 370149/20/2018-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, Dated 4th February, 2018 Subject: Under the existing regime, long term capital gains arising from transfer of long term capital assets, being equity shares of a company or a unit of equity oriented fund or a unit of business trust, is exempt from income-tax under clause (38) of section 10 of the Act. However, transactions in such long-term c .....

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emption under clause (38) of section 10 and to introduce a new section 112A in the Income-tax Act, 1961 ( the Act ) vide clause 31 of the Finance Bill, 2018 so as to provide that long-term capital gains arising from transfer of such long-term capital asset exceeding one lakh rupees will be taxed at a concessional rate of 10 percent. 3. Since the introduction of the Finance Bill, 2018 on 1st February, 2018, several queries have been raised in different fora on various issues relating to the propo .....

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Unit of an equity oriented fund; and iii. Unit of a business trust. The proposed regime applies to the above assets, if- a.. the assets are held for a minimum period of twelve months from the date of acquisition; and b. the Securities Transaction Tax (STT) is paid at the time of transfer. However, in the case of equity shares acquired after 1.10.2004, STT is required to be paid even at the time of acquisition (subject to notified exemptions). Q 2. What are the modes of acquisition of equity shar .....

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of the long-term capital asset on or after 1st April, 2018, as defined in clause (47) of section 2 of the Act. Q 4. What is the method for calculation of long-term capital gains? Ans 4. The long-term capital gains will be computed by deducting the cost of acquisition from the full value of consideration on transfer of the long-term capital asset. Q 5. How do we determine the cost of acquisition for assets acquired on or before 31st January, 2018? Ans 5. The cost of acquisition for the long-term .....

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rket value be determined? Ans 6. In case of a listed equity share or unit, the fair market value means the highest price of such share or unit quoted on a recognized stock exchange on 31st of January, 2018. However, if there is no trading on 31st January, 2018, the fair market value will be the highest price quoted on a date immediately preceding 31st of January, 2018, on which it has been traded. In the case of unlisted unit, the net asset value of such unit on 31st of January, 2018 will be the .....

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han the fair market value as on 31st of January, 2018, the fair market value of ₹ 200 will be taken as the cost of acquisition and the long-term capital gain will be ₹ 50 (Rs. 250 - ₹ 200). Scenario 2 - An equity share is acquired on 1st of January, 2017 at ₹ 100, its fair market value is ₹ 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at ₹ 150. In this case, the actual cost of acquisition is less than the fair market value as on 31st of Ja .....

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of January, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of ₹ 100 will be taken as actual cost of acquisition and the long-term capital gain will be ₹ 50 (Rs. 150 - ₹ 100). Scenario 4 - An equity share is acquired on 1st of January, 2017 at ₹ 100, its fair market value is ₹ 200 on 31st of January, 2018 and it is sold on 1st of April, 2018 at ₹ 50. In this case, the actual cost of acquisition is less than the fair market valu .....

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capital gain will be computed without giving effect to the provisions of the second provisos of section 48. Accordingly, it is clarified that the benefit of inflation indexation of the cost of acquisition would not be available for computing long-term capital gains under the new tax regime. Q 9. What is the date of commencement of the proposed new tax regime? Ans 9. The proposed new tax regime will apply to transfer made on or after 1st April, 2018. The existing regime providing exemption under .....

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2018 to 31st March 2018? Ans 11. As replied in answer 9, the new tax regime will be applicable to transfer made on or after 1st April, 2018, the transfer made between 1st February, 2018 and 31st March, 2018 will be eligible for exemption under clause (38) of section 10 of the Act. Q 12. What will be the tax treatment of transfer made on or after 1st April 2018? Ans 12. The long-term capital gains exceeding ₹ 1 Lakh arising from transfer of these asset made on after 1st April, 2018 will be .....

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ted at source in case of payment of long-term capital gains by non-resident tax payer (other than a Foreign Institutional Investor)? Ans 15. Ordinarily, under section 195 of the Act, tax is required to be deducted on payments made to non-residents, at the rates prescribed in Part-II of the First Schedule to the Finance Act. The rate of deduction in the case of capital gains is also provided therein. In terms of the said provisions, tax at the rate of 10 per cent. will be deducted from payment of .....

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sub-section (2) of section 196D of the Act. Q17. How will the gains in the case of FIIs be determined? Ans 17. The long-term capital gains in case of FIIs will be determined in the same manner as explained in earlier answers in the case of resident tax payers. Q 18. What will be the treatment of the gains accrued upto 31st January 2018 in the case of FIIs? Ans 18. In case of FIIs also, there will be no tax on gains accrued upto 31st January, 2018 as explained in Ans 10. Q 19. What will be the t .....

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1 Lakh arising from transfer of these asset made on after 1st April, 2018 will be taxed at 10 per cent. However, there will be no tax on gains accrued upto 31st January, 2018 as explained in Ans 10. Q21. What will be the cost of acquisition in the case of bonus shares acquired before 1st February 2018? Ans 21. The cost of acquisition of bonus shares acquired before 31st January, 2018 will be determined as per sub-clause (6) of clause 31 of the Finance Bill, 2018. Therefore, the fair market valu .....

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