LTCG tax to hit MF investments

If you sell after 31.3.2018 the LTCG will be taxed as follows: (Also refer to tables at the bottom)
1. The cost of acquisition of the share or unit bought before Feb 1, 2018, will be the higher of :
a) the actual cost of acquisition of the asset
b) The lower of : (i) The fair market value of this asset(highest price of share on stock exchange on 31.1.2018 or when share was last traded. NAV of unit in case of a mutual fund unit) and (ii) The sale value received/accrued when ..

This LTCG will be taxed at 10% for all listed equity shares where STT is paid on purchase and sale and at 10% for units of equity oriented MFs where STT is paid on the sale of these units . As STT is paid/deducted if you sell your equity MF units back to the MF or on the stock exchange the new LTCG regime would apply to these.

The manner in which long term capital gains will be taxed is novel since the accretion in the value of the shares/ equity oriented mutual funds as on 31 January 2018 will be available as the cost of acquisition thus giving some investors a cost step-up. In other words, only the gains accruing from February 1, 2018 will be subject to the long term tax. It is important to clarify that long term capital gains tax is effective 1 April 2018 and so shares sold upto 31 March 2018 will continue to be exempt from tax. Provisions have also been introduced to cap the cost of acquisition as equal to the sale consideration in case the shares are sold at a loss i.e. taxpayer will not be entitled to a long term capital loss if the market price of the share as on 31 January 2018 is higher than the sale value. India might probably be the only country which will levy a double tax on capital gains i.e. a long term tax and the Securities Transaction Tax.