Tax Planning

What do you meany by Capital Gain Tax and how its calculated?

                                                                     

Question:What do you mean by Capital gain ?
 Ans:In simple term capital gain when an individual sold their Asset at a price more than their purchase price.
Example : Mr X buy  50 Share of XYZ  ltd at a price of Rs 100 per share on 1-jan 2017 and sold their share on 31-NOV 2017 at a price of 300 each . Capital Gain of MR X is
Capital gain= 300-100 = 200*100= 20,000

Question: Types of capital gain ?
Ans: Capital gains are two types:
1. LTCG= long term capital gain
2. STCG= Short term capital gain

Question : LTCG or long term capital gain?
Ans:  When an individual hold their Asset more than one year and sold their asset after 365 days or one year from date of purchase of asset . This case applicable only in case of equity shares .
For example :Mr X buy  50 Share of XYZ  ltd at a price of Rs 100 per share on 1-jan 2017 and sold their share on 5-jan 2018 at a price of 300 each .  long Term Capital Gain of MR X is
Long Term Capital Gain: 300-200=100*200=20,000

Question: STCG or short term capital gain ?
Ans: when an individual sold their Asset with in one year from date of purchase the gain which he earned is Short term capital gain .
For example :Mr X buy  50 Share of XYZ  ltd at a price of Rs 100 per share on 1-jan 2017 and sold their share on 5-Oct 2017 at a price of 300 each .  Short Term Capital Gain of MR X is
Short Term Capital Gain: 300-200=100*200=20,000

Question : How much tax you have to pay on capital gain?
Ans: (1) STCG in above example is 20,000
 Short term Capital gain tax= 20,000*15/100=3000
 Mr X has to pay tax =  3000 on short term capital gain.

(2)LTCG: Long term capital gain in above example is =20,000
long term capital gain tax = NIL

Notes : (1)All the information which i give above is applicable only when you buy and sell equity shares and equity  Mutual fund .
(2) In 2005 EX finance minister Pchidmbaram abolish the long term capital gain on sold of equity share is NIL .

How Long Term Capital Gain Tax Rate 10% Announced in Budget speech 2018 Affect your           Budget /
                                                                                                                                                         

Introduction: In Budget Speech 2018 Honorable Finance Minister Shri Arun Jaitely Proposed Long Term Capital Gain  Tax Rate 10% on Gain on sale of equity share /  Mutual fund (amount invested in equity share mutual fund) . IF your long term capital gain is more than100000 then you have 10% on amount exceed 100000. In 2005 our EX Finance Minister P.Chidbaram abolish this long term capital tax on gain of sale of equity shares /mutual fund.hares or mutual fund  then this tax rate will affect your investment decision. if you think about invested in equity sa For complete information regarding tax on capital gain click this linkhttps://weplanforfuture.blogspot.com/2018/02/capital-gain-tax.html

Now with the help of example we understand this concept.

 First Case : Long term capital gain less than 100000
                Date of purchase                                       Nov 1,2015
                Share price                                                300
                Number of shares                                     1000
                Purchase value                                          3,00,000 (300*1000)
                Price on 31st jan 2018                              320
                Value on 31st jan 2018                             320,000   (320*1000)
                Grandfathered                                        20,000
                Date of sale                                               May 2018
                sale price                                                   400
                No of share sold                                        1000
                Sale value                                                  4,00,000 (100*1000)
                LTCG                                                        80,000 (400000-320,000)
               LTCG Upto 100000                                    No tax
               LTCG Exceed 100000                                Nil
               LTCG10%                                                  Nil
               Number of days invested                           913

   Second case: Long term Capital Gain More than 100000
             Date of purchase                                   Nov,1,2015                                        
             Share price                                             300
             Number of shares                                 1000
             Purchase value                                      300000 (300*1000)
             Price on 31stjan 2018                           320
             Market Value 3st jan 2018                   320,000  (320*1000)
             Grandfathered                                    20,000
             Date of sale                                           1,April 2018
             Sale price                                              450
             No of share sold                                   450,000   (450*100000)
             LT CG                                                   130,000 (450,000-320,000)
             LTCG up to 100000                              Nil
             LTCG exceed  100000                         30,000 (130,000-100000=30,000)
             LTCG Tax Amount                               3000 (30,000*10/100)
             Number of days invested                      913

   Grandfathered* means : the profit you gain up to 31st Jan 2018 is protected means you have to           pay no tax on profit up to 21st jan you gained .