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Treatment of long term capital gains- Budget 2018.-by C.A.NIKUNJ SHAH-CHARTERED ACCOUNTANT.

As per the new provisions of the budget appicable from 1st April 2018, onwards, when you derive any long term capital gains on sale of listed shares or securities , the cost of acquisition shall be caluclated by “GRANDFATHERING CONCEPT”-which is explained as under-


COMPARE it with the cutoff price(market price of the share) as on 31st JAN 2018,

Whichever is higher of the above,  is the acual cost for the purpose of taxing the long term capital gains @ 10 percent.

In case if the market price of the stock as on 31st JAN 2018, (cut off price)  is more than the actual cost, then just take this cutoff price as cost of acquisition and deduct it from the actual sale value of the stock.

For example- say your have sold Reliance shares on 1st april 2018 for Rs 1 lakh, (ASST YEAR 2019-20)

You have acquired Reliance shares in 2011 at a cost of Rs 25000/-.

The cutoff price as on 31st jan 2018 is Rs 85000/-.

The Long term capital gains shall be calulcated as under-

SALE VALUE= Rs 1 lakh

MINUS= COST OF ACQUISITION 25000 OR 85000-which is more =Rs 85000

Long term capital gains=Rs 15000/-.

Tax thereof @ 10 percent= 1500/-.

In short, you are at a liberty to adopt a higher purcase cost by substituting the FAIR MARKET VALUE OF THE STOCK AS ON 31ST JAN 2018, thereby reducing your Long term capital gains and its taxation effect thereon u/s 112.


Now from assessment year 2018-19 onwards, you can claim exemption u/s 54F in respect of the long term capital gains on sale of equity shares, by utitilzing the sale proceeds of equity shares by investing in a residential house.


The lock in period for investing in NABARD ,NHAI Bonds is increased from 3 years to 5 years.


Whenever there is a release of company's assets out of the accumulated profits , by way of loan by the company to the  shareholder, or by way of reduction of share capital , or any payment by the company  to an enterprise of a firm in which the shareholder has substantial interest(10 percent of voting power), then the company has to pay 30 percent tax by way of "DIVIDEND DISTRUBUTION TAX".

In short, previously the shareholder was taxable. But now the company (the payer )has to to pay the tax.

Therefore in my opinion, section 194-tds for deemed dividend, becomes redundant.


Now you wont get any deduction u/c VIA unless the return is filed in time, within the due date u/s 139.

Section 80C- You will get an adittional deduction u/s 80C of Rs 50,000/-, in adittion to Rs 1,50,000 provided you invest in NATIONAL PENSION SCHEME.


Its now compulsory to sell a residential property only at the existing "STAMP VALUE", or more as per section 50 C. Otherwise, in case if you sell it at a price lower than the stamp duty value,

the difference shall be charged to tax under the head "CAPITAL GAINS.", in the books of the transferor.

Also, the purchaser of the property will be charged to tax u/s 56 under the head ""INCOME FROM OTHER SOURCES" in respect of the shortfall of the consideration paid by him by him to the vendor-(ie difference between the stamp duty value and the actual cost.)


posted Nov 17, 2014, 4:02 AM by Nikunj Shah

Note- These are personal view points discovered and developed by C.A.NIKUNJ SHAH-CHARTERED ACCOUNTANT.( these are just in a very short summary-)
= The audit report has to be uploaded in XML format,ie- form 3CA for companies and 3CB for assesses other than companies(partnership firms, individuals,etc),
with the help of digital signature of Chartered Accountant. Also, the soft copy of balance sheet and profit and loss account is to be uploaded along with it.
 This applies only to tax audit cases,(turonver more than 1 crore),  not to statutory audit cases.
PAN CARD is now compulsory for every individual to enter into any transacion in India, or else tax will be deducted @ 20%, or rates in Finance ACT which is more.
=One man company is now likely to come as per the new provisions of the COMPANIES ACT 2013.
= A Private Limited Company can make a private placement of equity shares only subject to a monetory restriction of Rs 20,000/- per person, totalling to 200 members in total.
(The shareholding of promoters, directors are excluded.) The total amount of equity share capital that can be raised by Private Limited company by way of Private placement=
Rs 20,000 per member*200 members = Rs 40 lakhs. But there is no monetory restriction as regards the share premium.
=A closely held Public Limited Company ( Unlisted PUBLIC LIMITED COMPANY) can make a preferential allotment of equity shares of any amount-, subject to a maximum of just 49 members.
= USDOLLARS 1 MILLION is freely allowed for repatriation abroad, from NRO OR NRE ACCOUNTS. Interest on deposits in NRE account is exempt from tax U/S 10.
=If you create a PART IX Company, and if the said part IX company acquires a running business of a partnership firm or an exisitng company,
then there will be no stamp duty on acquisition of capitlal asset , as there is no conveyance.
=For deducting tax-TDS u/s 195, tax shall be deducted at rates prevailing under the Finance act or DTAA rates which is beneficial to non resident payee.
The word used is "ANY SUM PAYABLE" to a non resident- -it means tds must be deducted on capital expenditure, or revenue expenditure. The DTAA rates have an overriding effect over the rates prevailing
under the Finance Act. Even "Foreign Companies " are covered as payees, whiled deducting TDS u/s 195.
=in case if a non resident receives money from inheritance, by way of shares, gift, cash, property, etc, and if he wants the money back abroad, then he can route the amount by-
opening a Private discretionary trust. appointing a settlor and executor of the trust,-transfer the amount from indian curent account to NRO account, file tax returns in India, pay taxes,
and then transfer it to NRE account, subject to15CA CB certificate of C.A., and then repatriate the money abroad, under a liberalised scheme of 1 million dollars.
=Domestic transactions are also subject to transfer pricing. ,ie resorted to Alms Length Price.
=FOREIGN DIRECT INVESTMENT by Non resident Indian is prohibited in retail housing sector. ,(ie activity of buying selling residential houses, shops etc,) unless there is a development of infrastructural projects and townships.
= The charging section 22, under the head "Income from House property " , charges to the levy of tax of any house property- land or building appurtanent thereto, which is owned by the
assessee only for the purpose of his residence. The only exception is that the property should not be used for business of the assessee, then the income will be taxable under "Business Income or Incomefrom other Sources.".
=If any capital asset, forming part of the Block of asset , on which depreciation is allowed is sold during the year, then the provisions of  short term capital gain U/S 50. gets trigerred,-
 only when the block ceases to exist as on the last date of 31st March of the accouning year.
 But if the block of assets continues to exist as on the close of the year, then there will be no capital gains.
=Section 56 has been amended. -When any property/ flat or any capital asset is purchased for a considetation less than the Stamp duty  value, then the purchaser of the capital asset shall be chargable to tax u/s 56
for the diference of the sale value paid and the stamp duty valuation of the capital asset as on the date of the transfer. This is the reverse case ,where instead of taxing the seller, the purchaser is taxed under the
head "Income from other sources" u/s 56. Subsequently, when the purchaser sells the capital asset, then he will be subjected to capital gains,  by taking  the stamp duty valuation as on the date of original transfer, as the cost of acquisition which will be reduced from the sales value.
 -The Income tax assessments are  being reshuffeled and the AO are allotted cases alphabet wise of the names ot the assessees. Aiyekar ampark kendra has started in each Income tax department.
=The credit for TDS will be allowed only in that year in which the tds deducted is actually paid by the deuctor wihin the time limit U/S 200. -irrespective of the method of accounting adopted by the payee-cash or merchantile. The said TDS should be reflected in 26AS statement of the relevant financial year.

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