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- TAKE THE ACUAL PURCASE COST OF ACQUISITION, 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. SECTION 54F- 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. SECTION 54EC- The lock in period for investing in NABARD ,NHAI Bonds is increased from 3 years to 5 years. DEEMED DIVIDEND-2(22)- 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. DEDUCTION U/C VIA- 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. LONG TERM CAP GAIN ON SALE AND PURCHASE OF RESIDENTIAL HOUSE- 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.)