Share sales to attract long term capital gains tax from 1 April
31 March 2018
Long term capital gains (LTCG) exceeding Rs1 lakh from sale of shares will be taxed from 1 April, the beginning of 2018-19 financial year, as part of several budget proposals.
Along with the reintroduction of the tax on LTGC, the budget had proposed a reduction in corporate tax to 25 per cent on businesses with turnover of up to Rs250 crore.
Currently, a 15-per cent tax is levied on capital gains made on share sale within a year of purchase. However, it is nil for shares sold after a year of purchase.
However, indexation benefit for computing tax liability on sale of shares listed after 31 January will be available to investors.
The government had, in July 2004, abolished LTCG tax on shares and replaced it with the securities transaction tax (STT) — a same-day tax credit system that continues.
For the individual taxpayer, the government has allowed a standard deduction of Rs40,000 in lieu of transport allowance and medical reimbursement, which will come into effect from 1 April.
While the exemption limit on income from interest for senior citizens has been raised five times to Rs50,000 per year, that for health insurance premium and medical expenditure has been raised to Rs50,000 from Rs30,000, respectively under section 80D of the I-T Act.
For senior and very senior citizens, tax deduction for critical illness will be Rs1 lakh from 1 April against the existing limit of Rs60,000 for senior citizens and Rs80,000 for very senior citizens.
In the last regular Budget of the present NDA government, finance minister Arun Jaitley had retained the 10-15 per cent surcharge on super-rich, while raising the health and education cess, levied on all taxable income, to 4 per cent from 3 per cent at present.
Keeping the income tax rates and slabs unchanged, the budget had introduced a Rs40,000 standard deduction for salaried employees and pensioners in lieu of the present exemption in respect of transport and medical expenses.
The standard deduction, which is provided to salary earners, was discontinued from the assessment year 2006-07.
At present, no tax is applicable on Rs19,200 of transport allowance and medical expenditure of up to Rs15,000. This has now been subsumed into the new standard deduction of Rs40,000 which may mean very little benefit in tax saving considering that health and education cess has gone up.