Tax on LTCG (Long Term Capital Gain) on sale of shares

“Long Term Capital Gain” on transfer of Listed equity shares/ Equity Oriented units / Units of Business Trust held for more than one year from the date of acquisition are exempt u/s 10(38) of Income Tax Act, 1961 provided Security Transaction Tax (STT) should have been paid.

However, an amendment was brought out by Government in Finance Act, 2018 applicable w.e.f A Y 2019-20 onwards, based on which LTCG on sale of Listed equity shares/ Equity Oriented units / Units of Business Trust exceeding Rs.1 Lakh shall be taxable u/s 112A at a flat rate of 10% without providing the benefit of indexation on the amount in excess of Rs.1 Lakh.

However, when any assesse sells shares from FY 2018-19 & onwards and has acquired such shares on or before 31/01/2018, the Cost of Acquisition (COA) of shares shall be computed as below:

COA of such shares shall be the higher of:

1. Actual COA of the shares

2. Lower of:

a. Highest Fair market value of such shares on 31/01/2018

b. Sale price of the share.

Understanding of Sec 112A of Income Tax Act