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HOW TO COMPUTE LONG TERM CAPITAL GAINS ON EQUITY MUTUAL FUND
8 months ago

This means the long term capital gains or the profits coming out from the sale of stock or by redeeming the equity mutual funds if held for more than a year. Keep in mind that the mutual funds with an allocation of at least 65% on equities are called as equity mutual funds and are considered for taxation purposes. If an investor incurs loss, then he doesn’t have to pay any tax on LTCG.

The tax will be charged on the sale of shares or mutual funds after 1st April, 2018 if they are held for more than 1 year. So if you have sold it before 31st march 2018, no tax will be charged. If the equity mutual funds are sold within duration of 1 year, then it will be considered under short term gains taxation policy. The tax over short term capital gains is kept unchanged and it is still 15%.

How to calculate long term gains on mutual funds?

The following set of examples will make the subject very clear:

Example 1

Cost of mutual fund on 1st January 2017= Rs 100

Price as on 31st January 2018= Rs 200

Selling price as on 31st March, 2018= Rs 250

Since the mutual fund is sold before 31st March, 2018, no tax liability will arise.

Example 2

Cost price of mutual funds as on 1st January 2017= Rs 200

Price as on 31st March 2018= Rs 300

Selling price as on 1st April 2018= Rs 350

As the funds are sold after 31st March 2018, it will be considered as a long term capital gain. The cost of acquiring the funds is less than the market value as on 31st March, 2018. In that case the market value of Rs. 300 will be considered as the acquisition cost and the LTCG will be: Rs. 350- Rs 300= Rs 50

Example 3

Cost of funds as on 1st January, 2017= Rs 200

Market value as on 1st January 2018= Rs 300

Selling price as on 1st April 2018= Rs 250

Here the real cost of acquiring the funds are below the market value on 1st January 2018 and also the selling price is below the market price as on 1st January 2018. So the selling price will be considered as acquisition cost and the overall LTCG will be zero, i.e. Rs 250- Rs. 250= 0

Example 4

Cost price as inn 1st January 2017= Rs 200

Market value as on 31st January 2018= Rs. 150

Selling price as on 1st April 2018= Rs 250

Here the market value on 31st January 2018 is less than the acquisition cost. So the real cost of Rs. 200 will be treated as the acquisition cost and the LTCG will be: Rs. 250- Rs 200= Rs 50

Example 5

 Coat price a on 1st January 2017= Rs 200

Market value as on 31st January 2018= Rs 300

Selling price as on 1st April 2018= Rs 150

Here the actual acquisition cost is below the market price as on January, 31st 2018. And the selling price is also less than the market value as on January 31st, 2018. So Rs 200 will be taken as the acquisition cost and there will be a LTCL of Rs. 50, i.e. Rs 150- Rs 200= - Rs 50.

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