Download Finance Bill 2018

The Finance Bill 2018, as introduced in Parliament today, is available for download. There are several important amendments proposed by the Finance Bill 2018 to the Income-tax Act, 1961, including the taxation of long-term capital gains (LTCG) at 10%.

As per the Finance Bill 2018, the long term capital gains on investments in equities exceeding Rs 1 lakh will be taxed at 10% without allowing benefit of indexation. The gains made till January 31 will be grandfathered.

Finance Bill 2018: Relevant provisions from the Budget speech

Rationalisation of Long Term Capital Gains (LTCG)

155. Madam Speaker, currently, long term capital gains arising from transfer of listed equity shares, units of equity oriented fund and unit of a business trust are exempt from tax. With the reforms introduced by the Government and incentives given so far, the equity market has become buoyant. The total amount of exempted capital gains from listed shares and units is around `3,67,000 crores as per returns filed for A.Y.17-18. Major part of this gain has accrued to corporates and LLPs. This has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets. The return on investment in equity is already quite attractive even without tax exemption. There is therefore a strong case for bringing long term capital gains from listed equities in the tax net. However, recognising the fact that vibrant equity market is essential for economic growth, I propose only a modest change in the present regime.

I propose to tax such long term capital gains exceeding `1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31st January, 2018 will be grandfathered. For example, if an equity share is purchased six months before 31st January, 2018 at `100/- and the highest price quoted on 31st January, 2018 in respect of this share is `120/-, there will be no tax on the gain of `20/- if this share is sold after one year from the date of purchase. However, any gain in excess of `20 earned after 31st January, 2018 will be taxed at 10% if this share is sold after 31st July, 2018. The gains from equity share held up to one year will remain short term capital gain and will continue to be taxed at the rate of 15%. Further, I also propose to introduce a tax on distributed income by equity oriented mutual fund at the rate of 10%. This will provide level playing field across growth oriented funds and dividend distributing funds. In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about `20,000 crores in the first year. The revenues in subsequent years may be more.

One comment on “Download Finance Bill 2018
  1. B M Chaturvedi says:

    What will be justification to levy MAT @ 20% (minimum alternative tax) when now Maximum LTCG on STT paid shares will be @10% from 1-4-18

11 Pings/Trackbacks for "Download Finance Bill 2018"
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  2. […] V. P. Gupta has explained the salient amendments proposed in the Finance Bill 2018 relating to the taxability of long-term capital gains. He has pointed out that some provisions are […]

  3. […] Rahul Sarda has analyzed the amendments proposed by the Finance Bill 2018 to sections 2(22), 115-O and 115-R of the Income-tax Act, 1961 with regard to the taxation of […]

  4. […] Sunil Moti Lala and CA Tushar Hathiramani have analyzed the amendments proposed in the Finance Bill 2018 relating to “business connection“. They have explained the precise scope of the […]

  5. […] Bansi S. Mehta, Saurabh Soparkar and Dr. Girish Ahuja, have conducted an in-depth analysis of the Finance Bill 2018 and explained all of its important amendments. Advocate Sashank Dundu has meticulously summarized […]

  6. […] has systematically set out all the amendments proposed to be made to the Direct Tax Laws by the Finance Bill 2018 in a tabular format. He has then compared the amendments with the existing law and explained the […]

  7. […] Dev Kumar Kothari has argued that there is a drafting mistake in the Finance Bill 2018 relating to the grant of standard deduction. He has explained what that mistake is and offered […]

  8. […] Finance Bill 2018 has reintroduced the taxation of Long-term capital gains (LTCG) on stocks. The CBDT has issued a […]

  9. […] The drafting error created an uproar amongst taxpayers at the shoddy drafting of the Finance Bill 2018. […]

  10. […] proposal in the Finance Bill 2018 to reintroduce tax on long-term capital gains on shares has created confusion amongst taxpayers and […]

  11. […] Vidhan Surana & CA Sunil Maloo have conducted a succinct analysis of the provisions of the Finance Bill 2018 and explained the important amendments that it seeks to incorporate in the Direct Tax law. The […]

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