1. Capital gain is profit from the sale of an asset when the selling price is higher than the purchase price. 2. Capital gains are taxed at 15% for holdings of less than 1 year (short term) and 10% for more than 1 year (long term). 3. Indexation allows adjustment of the purchase price for inflation to reduce long term capital gains tax.

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2. Capital gain is the profit one earns on the sale of an asset
like stocks, bonds or real estate. It results in capital gain
when the selling price of an asset exceeds its purchase
price.
It is the difference between the selling price (higher) and
cost price (lower) of the asset. Capital loss arises when the
cost price is higher than the selling price.
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3.  When holding period is less than or equal to 1 year
 STCG 15%
 When holding period is more than 1 year
 LTCG 10%
 Note: From 1st April 2018 LTCG is applicable
 LTCG of Rs 1,00,000 is exempted.
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4.  Buy on 1st Jan 2016 10 lakh(Purchase Price)
 Price on 31st Jan 2018 13 Lakh( Market value)
 Sold on 20 April for Rs 15 lakh
 Calculate LTCG & amount of tax ?
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5.  Dividend Distribution Tax
 It is deducted at source and rate of dividend is 10%.
 For Individual and corporate tax rate are same.
 Hence growth option will be better for long term.
 Dividend tax 10% + Surcharge 12% + Cess 4%
 Effective Dividend rate 11.648%
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6.  Surcharge is 12%
 Cess is charged 4% on LTCG & STCG.
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7.  For holding period is less than or equal to 3 year
 STCG As per individual tax slab rate
 For holding period more than 3 year
 LTCG 20%.
 Investor is entitled to get benefit of Indexation.
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8.  Indexation means that the cost of acquisition is adjusted
upwards to reflect the impact of inflation.
 The government comes out with an index number for every
financial year to facilitate this calculation.
 Indexation benefit is available only in case of long term
capital gains and not short term capital gains.
 Tax is payable on long-term capital gains, after indexation,
at 20% plus surcharge plus cess.
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9. For example, if the investor bought units of a debt-
oriented mutual fund scheme at Rs 10 and sold them at
Rs 15, after a period of 3 years. Assume the
government’s inflation index number was 400 for the
year in which the units were bought; and 440 for the
year in which the units were sold.
How much tax the investor would need to pay tax
based on indexation?
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10.  Indexed cost of acquisition is Rs 10 X 440 ÷
400 i.e. Rs 11.
 The capital gains post indexation is Rs 15
minus Rs 11 i.e. Rs 4 per unit.
 20% tax on this would mean a tax of Rs 0.80
per unit.
 Surcharge and education cess is extra.
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11.  Dividend Distribution Tax
 On individual/HUF 25%
 On Corporate 30%
 For NRI individual investor : If NRI invest in
Infrastructure fund than rate of dividend is 5%.
 Dividend Tax of 25% + Surcharge of 12% + Cess 4%
 Effective dividend rate on individual 29.12%
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12.  STT is applicable only for Equity, Derivatives and
equity mutual fund.
 STT is a tax payable in India on the value of securities
are transacted through stock exchange.
 On Debt oriented Mutual Fund STT is not charged.
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13. Transaction Rates Payable by
Purchase/ Sale of equity
shares (delivery based)
0.1% Purchaser/Seller
Purchase of units of
equity oriented mutual
fund
Nil Purchaser
Sale of units of equity
oriented mutual fund
0.001% Seller
Sale of equity shares,
units of business trust,
units of equity oriented
mutual fund (non-
delivery based)
0.025% Seller
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14.  Set off is the facility to reduce the capital gains by
deducting the capital loss incurred or carried forward.
 LTCL is set off against LTCG.
 STCL is set off against LTCG or STCG
 STCL or LTCL cannot be set off against any other
sources of Income.
 Carried Forward of losses can be for 8 years.
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15.  Investments in mutual fund units are exempt from
Wealth Tax.
 This is irrespective of where the fund invests.
 Although investment in physical gold or real estate may
attract wealth tax in case of direct investors,
investments in Gold ETF and real estate mutual funds
are exempt from wealth tax.
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