How to calculate Long term capital gain from Equity shares

From a personal savings and investment perspective, the restoration of long-term capital gains tax on equity income is a huge change. 

Selling stocks or equity mutual funds that you have held for the long term will mean paying taxes on gains accrued since the market closing of January 31. If, in a year, you realise more than Rs 1 lakh of such gains, then 10.04% of that (including cess) has to be paid as tax. 

How to calculate Long term capital gain from Equity shares is explained as under

The purchase price of the stock will be calculated as under

Higher of A and B will be cost of acquisition of shares.

A) Actual purchase price of share 

B) Lower of following 

   i) Highest rate on 31.01.2018 

   ii) Actual sale price 

The above cost of acquisition will be deducted from sale price to calculate capital gain .Flat 10 % tax will be payable on calculated amount of capital Gain.

This concessional rate of 10 per cent. will be applicable to such long term capital gains, if—

• i) in a case where long term capital asset is in the nature of an equity share in a company , securities transaction tax has been paid on both acquisition and transfer of such capital asset; and
• ii) in a case where long term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, securities transaction tax has been paid on transfer of such capital asset.

Indexation of the cost of acquisition (determined as per above formula) will not be allowed. Setting off cost of transfer or improvement of the share/unit will also not be allowed. 

So effectively all the gains up to 31.01.2018 has been exempted under new rules . The full details has been explained by example as under.

Tip : As Rs 100000 is exempted from capital gain every year , one can sell so much of their portfolio every years so that he can earn Long term capital gain of One lakh and purchase the same shares again .