What are long term capital gains (LTCG) in equities?
Any profit or gain made after holding shares for more than one year is known an long term capital gain. For example, if one invests in XYZ stock at Rs 100 on 1 Jan 2017 and sold the same at Rs 150 after 1 Jan 2018, the gain of Rs 50 is termed as long term capital gains.
Who will be taxed?
Anybody who has invested in share market and earns profit from the rise in share value. Earlier, anybody who sold his share after 1 year did not have pay any taxes on the profit. However, that's changed. Starting 1st April 2018, all share market investors need to pay taxes on the profit they earn - both short-term investors and long term investors.
How will the investors be taxed?
If one holds shares for more than one year, he will be taxed at 10 per cent, if the gains exceed Rs 1 lakh. Short-term investors will continue to pay 15% short-term capital gains tax if an investor sells share within a year from the date of purchase.
Will people who are already invested be taxed? How?
Yes, but only marginal gains will be taxed. Gains up to 31 Jan 2018 will be exempt. A stock bought at Rs 100 on Jan 1, 2016 hits a high of Rs 170 on Jan 31, 2018. If the same is sold on Apr 2, 2018 for Rs 200, the long term capital gain will be Rs 30 (As the highest price of Rs 170 will be the purchase price). And the LTCG tax will Rs 3 plus surcharges.
Do mutual fund investors have to pay long-term capital gains tax?
Yes, investors in equity-oriented mutual funds have to pay long-term capital gains tax. Any Long Term Capital Gains (LTCG) over Rs 100,000 per year on Equity Mutual funds will now be taxed at 10 percent. Dividends will be taxed at 10 per cent.