The famous budget speech by Arun Jaitley left the investors disappointed with the re-introduction of long-term capital gains tax (LTCG). LTCG which was abolished sometime in 2004, by introducing STT was re-introduced for the equity investors with a 10% tax on capital gains over and above Rs 1 lakh for the financial year for the investments made above one year.
Let me give you an example of a real equity test case example. Let’s take ESCORTS as a test case. Assume I purchased ESCORTS share on August 9, 2016, at a price of Rs. 260 per share. It reached a peak of Rs. 811 per share on Jan 31, 2018. So, according to the grandfather clause, If I sell the shares at or below Rs 811, I don’t have to pay any tax on the same (before 31st July 2018). Assume I sell it on 3rd April 2018 at the price of Rs 884 per share, my tax liability will be based on Rs 884 – 811 = 73 i.e. my tax liability would be 10% of Rs. 73. (Up to Rs 1 Lakh tax-free income still applies here)
The Grandfather clause is applicable to domestic investors for equity and mutual funds investments on LTCG.