Union Finance Minister Arun Jaitley has previously announced a 10% LTCG (Long Term Capital Gains) tax on equity-based mutual funds and stocks in case the gains amount surpasses Rs. 1 lakh. The CBDT (Central Board of Direct Taxes) has already delineated the taxation scenario across various circumstances.
For example, suppose there is acquisition of an equity share on the first day of the month for a value of Rs. 200 and the value of the same in the market on the last day of the month is Rs. 400. Suppose it is sold at Rs. 450 sometime later. The actual cost on acquisition being lower than the market value, the value of Rs. 400 will be taken as the acquisition cost and LTCG will be Rs. 50, i.e. (Rs. 450-400).
Keeping the same scenario in mind, suppose the equity share is being sold for Rs. 350. In this case, the acquisition cost will be lower as compared to the market value. However, the sale value will also be lower than the market value. The sale price of Rs. 350 will be considered as acquisition cost and the LTCG will be Zero, i.e. Rs. 350-350.
Suppose, in the same scenario, one buys an equity share for Rs. 200 and its value in the market is Rs. 150. Suppose it is sold at Rs. 250 and hence in this situation, the market value is lower than the acquisition cost and hence the actual cost of Rs. 200 will be considered as the acquisition cost. The LTCG will be then Rs. 50, i.e. (Rs. 250-200).
Another way in which LTCG works has been delineated as well. Suppose you acquire one equity share for a value of Rs. 200 and the market value is Rs. 400. Suppose it is sold at a value of Rs. 150. Here, the actual acquisition cost will be lower as compared to the market value. However, the sale value will be lower than the market value and also the acquisition cost. The actual Rs. 200 will be taken as the acquisition cost in this case. There will be no LTCG and instead, the long-term capital loss will stand at Rs. 50, i.e. (Rs. 150-Rs. 200).