Grandfathering – New Capital Gains Tax Simplified

India’s 2018 Budget delivered by Finance Minister, Mr. Arun Jaitley proposed a long-term capital gains tax of 10% on stocks and equity mutual funds exceeding Rs. 1 lakh without allowing any benefit of indexation. However, as per the Budget, all gains until 31st January, 2018 will be grandfathered. According to Wikipedia, a grandfather clause is a provision by which an old rule continues to apply to a certain existing situation while a new rule would apply to all future instances. This implies that you will not be taxed on any gains that you have already accumulated up until 31st January, 2018.

More recently, on 4th February, 2018, the Central Board of Direct Taxes (CBDT) issued a list of 24 frequently asked questions (FAQs) regarding taxation of long-term capital gains proposed in the Finance Bill, 2018. This list of FAQs further makes it clear that the new long term capital gains tax will be applicable only for sales on or after 1st April, 2018. The long-term capital gains tax exemption will continue for any sale between 1st February and 31st March, 2018 as per current taxation policies. To summarize, there is no change in the long term capital gains tax exemption for the financial year 2017-18.

MProfit has consistently been the preferred choice of solution amongst chartered accountants and investors for the computation of short-term and long-term capital gains. As the new long term capital gains tax change is not applicable for the current financial year FY2017-18, investors should continue using the existing version of MProfit to compute capital gains for the financial year FY 2017-18.

MPROFIT WILL PROVIDE SUPPORT FOR NEW CHANGES TO CAPITAL GAINS CALCULATIONS IN THE COMING MONTHS.

The scenarios below detail how long term capital gains will be calculated for sales on or after 1st April, 2018. In each of these scenarios, a certain asset is purchased on 1st January 2017 and sold on 1st April 2018. The Long Term Capital Gain calculation for this asset is now computed by determining what the Cost of Acquisition is for the asset, by comparing the values for Purchase Price (PP), Fair Market Value on 31st January 2018 (FMV)  and Sale Price (SP):

ScenarioScenario DescriptionPurchase Price as on 01-Jan-2017 (PP)Fair Market Value as on 31-Jan-2018 (FMV)Sale Price as on 01-Apr-2018 (SP)Cost Price for Capital Gains CalculationLong Term Capital Gain
1PP < FMV < SP10020025020050
2PP < SP < FMV1002001501500
3FMV < PP < SP1005015010050
4SP < PP < FMV10020050100-50
5SP < FMV < PP1005025100-75
6FMV < SP < PP1005075100-25
7Bonus: PP = 0, FMV < SP
020025020050
8Bonus: PP = 0, SP < FMV
02001501500

If you would like to learn more about how MProfit simplifies capital gains for various assets, click here.

Click here to download the FAQ list published by CBDT.

Comments

  1. MILAN S PANCHAMIA says:

    Its excellent software and after sales service is also good. I can give 10/10 to this software.

  2. Thank you for the excellent feedback!

  3. It is very very good software. It has made my task of calculation of STG and LTG on sale and purchase of shares very easy. i have been searching for such for software for the last two years and was spending lot of time by entering each and every entry in excel sheet.

    i am very happy this soft ware

  4. Thank you for your positive feedback

  5. Dhiren Shah says:

    OK

  6. I AM A LONGterm investor say 20yrs in many sripts i do not have details ot cost of acqisitions of many shares
    tothere after bonusshare are added to it now most of the shares are haveing very very high now suggest me howto handle this situition and your software will help me as of now the capitalgaintax rules are also changing please guidemeand oblige,thanking you.

  7. MProfit can certainly help you compute capital gains. Please email your contact details to support@mprofit.in so our support team call you and assist

  8. Nandkumar Ambraskar says:

    Thank u for excellent feed back to med class small investors

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