08 Jun 2019

How to Easily Calculate Tax on Shares and Mutual Funds?

How to Easily Calculate Tax on Shares and Mutual Funds?


  1. In order to incentivize the equity markets, the Government has given various sops to this sector. Under Section 10(38) of Income Tax Act, exemption to long term capital gains arising from sale of equity shares in a company or unit of an equity oriented fund has been provided.


  1. Equity oriented fund is the one where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 65% of the total proceeds of such fund and has been set up under a scheme of a mutual fund specified under clause(23D).


  1. However, long term capital gains will be computed without giving effect to the inflation indexation in respect of cost of acquisitions and cost of improvement, if any and also the benefit of computation of capital gains in foreign currency in case of non-resident will not be allowed.


  1. Benefit of Grand Fathering


Investments made on or before 31st January, 2018 have been grand fathered, cost of acquisition in respect of such investments made up to 31 January, 2018 shall be deemed to be higher of:-


  1. Actual cost of acquisition of such investments and


  1. The lower of


  1. FMV of such asset


  1. Conclusion


Now as the time for filing of tax returns is approaching, it would be imperative that the calculations are done as per the latest rules put forth by the Government according to which equity shares and equity oriented funds have become taxable above the threshold.