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How does the new long term capital gain tax work?

A 10% long-term capital gain tax is applicable, on gains of more than Rs 1 lac a year,  when you sell a share (applicable to mutual funds units as well) after 1 year or more of buying it i.e holding for a year. This is per year as a whole, not a scrip.

Note : There is also a 4% health and education cess on the same.

This is grandfathered until 31 Jan 2018. Meaning, whatever gains you had until 31 Jan 2018 are tax-free. Only FURTHER gains will be taxed at 10%.

Grandfathered here means, for shares that have been held for more than a year, and are being sold after Jan 31st, the purchase price will be higher of the two -

a) Actual purchase price
b) Highest price recorded on 31st Jan, 2018

Ex - If you have purchased a share at Rs 500 in Jan 2015, and you sell it in April 2018 for Rs 1000, and the price of the share on 31st Jan is Rs 700, your LTCG will be considered as Rs 300 and not Rs 500 for the purpose of taxation.

If you sell it in April for Rs 650, you can't take the purchase price as Rs 700 and claim a loss, instead, your sale price will be considered as your purchase price and there will be no tax applicable.

You can find out your LTCG tax liability under this clause, by downloading your Tax P&L report from Console. Refer to this article for more.

This rule will be applicable from April 1st, 2018. So, there will be no LTCG tax on shares sold up to this date.

Note : This is applicable under the current taxation rules and could be subject to changes.