LTCG (Long Term Capital Gains Tax) – Explained

Budget for 2018-19 comes with the new tax process for the Equity Investor, who are holding the investment more than a year. Earlier the long term capital gains used to be tax free, but as the new budget comes into the picture, the LTCG is now been taxed at 10% for the profit above 1 lac after deducting the grandfathered tax free portion as of 31st January 2018. Short term gain remain same as earlier with taxed at 15%.

Here, we are trying to understand the it in more simpler way and to identify the best approach to reducing the tax on our capital gains.

Scenario -1 : Tax to be paid on the LTCG after generating the capital gains:

Long Term Capital Gain(LTCG) - Explained Scenario_1
Long Term Capital Gain – Explained Scenario_1

Scenario -2 : No Tax to be paid on the LTCG after generating the capital gains upto 1 lac:

Long Term Capital Gain(LTCG) - Explained Scenario_2
Long Term Capital Gain – Explained Scenario_2

Scenario -3 : No Tax to be paid on the LTCG after grandfathered tax free portion went in loss and capital gains upto 1 lac.

Long Term Capital Gains(LTCG) - Explained Scenario -3
Long Term Capital Gains – Explained Scenario -3

Scenario -4 : No Tax to be paid on the LTCG after grandfathered tax free portion is more than the capital gain.

Long Term Capital Gains(LTCG) - Explained Scenario -4
Long Term Capital Gains – Explained Scenario -4

Scenario -5 : No Tax to be paid and offsetting the capital gain when capital loss is incurred

Long Term Capital Gains(LTCG) - Explained Scenario -5
Long Term Capital Gains – Explained Scenario -5

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