LTCG tax: Govt extends indexation benefit to share sale in unlisted cos

NEW DELHI: Giving some reduction to traders, the federal government on Wednesday prolonged indexation advantage for computing tax legal responsibility on sale of shares indexed after January 31, though capital gains arising from such transactions will continue to be taxed at 20 in keeping with cent.
The indexation benefit- which takes into consideration the affect of inflation on acquisition cost- might not be available on gains created from sale of indexed securities, as in keeping with the amendments to the Finance Bill, which was once handed by means of Lok Sabha nowadays.

The 2018-19 Budget had after a gap of 14 years reintroduced 10 in keeping with cent tax on long-term capital gains (LTCG) exceeding Rs 1 lakh from sale of shares.

Currently, 15 in keeping with cent tax is levied on capital gains made on sale of shares inside a 12 months of acquire. However, LTCG tax is nil for shares bought after a 12 months of acquire.

LTCG on sale of unlisted shares is taxed at 20 in keeping with cent, while in case of quick time period capital gains it is 30 in keeping with cent.

The finance ministry had won more than a few representations difficult removing of LTCG tax.

Nangia & Co Managing Partner Rakesh Nangia mentioned the modification addresses the concerns of the group in respect of capital gains arising on switch of unlisted shares that get indexed after February 1, 2018.

"The Finance Bill provides that the indexed cost of acquisition of such shares shall be considered for the purpose of computing capital gains. This amendment has partly addressed the concern, since the Cost Inflation Index may not completely account for the rise in the fair market value of such share," Nangia mentioned.

The modification seeks to offer that the honest market value of shares that are unlisted on January 31, 2018 but indexed on date of switch will probably be indexed as in keeping with charge of acquisition.

"This will also apply for unlisted shares which are substituted in tax neutral transfers (like amalgamation, demerger, gift, succession, etc) for shares which are listed on date of transfer," EY India Tax Partner Raju Kumar mentioned.

Besides, the federal government has introduced an modification to ensure that the Public Provident Fund (PPF) accounts aren't attached in case of mortgage default.

The modification has been made within the Government financial savings Banks Act, 1873, in the course of the Finance Bill, 2018.

Nangia & Co Director Direct Taxation Shailesh Kumar mentioned the modification intends to offer protection to the retirement benefits/ social safety of such individual, who could have defaulted in compensation of debt for any circumstantial reasons.

The Finance Bill, which can now be taken up by means of Rajya Sabha, will turn into an Act as soon as signed by means of the President.

Observing that Sensex and Nifty have misplaced greater than 7 in keeping with cent since February 1, 2018, DGM Naveen Wadhwa mentioned traders had been anticipating some reduction from the federal government like deferment of recent capital gains tax or increase within the threshold prohibit from Rs 1 lakh to Rs 2 lakh.

"The only noteworthy change is that of allowing the indexation benefit to shares which were unlisted as on January 31, 2018 but are listed on the date of transfer which happens to be on or after April 1, 2018," Wadhwa mentioned.
LTCG tax: Govt extends indexation benefit to share sale in unlisted cos LTCG tax: Govt extends indexation benefit to share sale in unlisted cos Reviewed by kailash soni on March 14, 2018 Rating: 5
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