Government to extend indexation benefit to sale of share of unlisted companies:To provide relief to the investors, the government on 14th March 2018 extendedindexation benefitfor computing income tax liability on sale of shares listed after 31st January , all though capital gains arising from such transactions will continued to be taxed at the rate of 20 per cent.[You May Also refer :FAQs on Long Term Capital Gain proposed in Finance Bill, 2018]
Background of this amendment
Finance Bill 2018 has introduced 10 per cent tax on long-term capital gainsexceeding Rs 1 lakh from sale of listed equity shares.
Currently, 15 per cent tax is levied on short term capital gains made from sale of listed equity shares.
However, LTCG tax is nil for such shares sold after a one year of purchase.
LTCG on sale of unlisted shares is taxed at 20 per cent, while in case of short term capital gains it is 30 per cent.
Many representations were made to ministry, for removal of10 per cent tax on long-term capital gainsexceeding Rs 1 lakh from sale of listed equity shares.
The Share market had a negative impact, due to taxation oflong-term capital gainsexceeding Rs 1 lakh from sale of listed equity shares.
Shareholders were excepting some relief in form of deferment of this proposed tax or increase in threshold limit of Rs. 100,000.
This step ofGovernment to extend indexation benefit to sale of share of unlisted companies will allowtheindexation benefitto shares which were unlisted as on January 31, 2018but were listed on the date of transfer i.e. 1st April 2018 or afterwards.