You are here: Home » PF » Features » Tax
Business Standard

How you can smartly use the systematic exit route to avoid LTCG tax

Just ensure the overall long-term capital gain in a financial year is below Rs one lakh -- you won't be taxed

Saraswathi Kasturirangan & Suresh Kumar 

How you can smartly use the systematic exit route to avoid LTCG tax

The has in the Finance Bill, 2018 proposed to certain that have so far been exempt from Currently, capital gains from transfer of equity shares in a company and a units of are exempt from tax, provided they have been held for more than one year prior to transfer. Equity shares should also have been subject to (STT) in order to avail this exemption. In other words, from the transfer of listed shares and units of an equity-oriented scheme are not subject to As proposed, arising from the transfer of an equity share in a company on which has been paid, or a unit of an equity-oriented fund, shall be taxable at the special rate of 10 per cent without any indexation benefit. However, any such capital gains up to Rs 1 lakh shall not be subject to Further, to avoid any retrospective impact, gains up to 31 January 2018 will be grandfathered. This is done by introducing a deeming provision for determining the cost of acquisition. Accordingly, the cost of acquisition would be the higher of the actual cost of acquisition and the fair market value. Fair market value would be determined as summarized below: A.

Asset listed on a recognised stock exchange and traded on 31 January 2018 - highest price quoted on such exchange on 31 January 2018 B. Asset listed on a recognised stock exchange and not traded on 31 January 2018 - highest price quoted on such exchange on a date prior to 31 January 2018 on which the asset was traded C. Unit not listed on a recognised stock exchange – net asset value as on 31 January 2018 Thus, in summary, effective 1 April 2018, any gain post 31 January 2018, in excess of Rs 1 lakh in a financial year, from sale of listed shares and unit of equity-oriented fund would be subject to at the rate of 10 per cent. The above changes are very thoughtful from the perspective of investors. On the one hand, the grandfathering of gains up to 31 January 2018 has avoided any immediate sell-off. Further, small investors can avail the benefit of exemption from on from transfer of listed shares and units, by opting for systematic transfer/exit, such that the overall gain in a financial year is below the threshold of Rs one lakh.


Saraswathi Kasturirangan is Partner, Deloitte India. Suresh Kumar is Director with Deloitte Haskins and Sells LLP. Views are personal and do not reflect those of Business Standard.

First Published: Thu, February 08 2018. 13:03 IST
RECOMMENDED FOR YOU