Long Term Capital Gain

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Querist : Anonymous

Querist : Anonymous (Querist)

15 July 2010 Is LTCG in respect of Unlisted Equity shares taxable at 10% without indexatiom ?

CA. Anoop Gadia

CA. Anoop Gadia (Expert)
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15 July 2010 yes

DR GAURAV GUPTA FCA, FCS, LL.B

DR GAURAV GUPTA FCA, FCS, LL.B (Expert)
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15 July 2010 yes but it is an option if ltcg is calculated without cosidering indexed cost of acquisition but if idexed cost is cosidered than 20% rate is applicable

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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16 July 2010 The option referred by Mr.Gaurav is only for listed securities vide proviso to section 112(1) of the Income tax Act,1961. Therefore, LTCG of unlisted securities has to be taxed @ 20 % vide section 112 (1) (a)/(b)/(c)/(d).

Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2010 Is the tratment same for LTCG on Capital Protection Bonds ?

Querist : Anonymous

Querist : Anonymous (Querist)

16 July 2010 Is the treatment same for LTCG on Capital Protection Bonds ?

Asha Kanta Sharma online

Asha Kanta Sharma

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03 August 2024 The treatment of Long-Term Capital Gains (LTCG) on Capital Protection Bonds (CPBs) differs slightly from the treatment of LTCG on other assets like real estate or equities. Here’s how LTCG on CPBs is treated:

### **Capital Protection Bonds (CPBs)**

**1. **Nature of CPBs:**
- CPBs are structured financial instruments that offer a guarantee of the principal amount (capital protection) along with a potential for returns linked to a certain index or market.

**2. **Capital Gain Treatment:**
- **Long-Term Capital Gain:** If the CPBs are held for more than 36 months (3 years), any gain realized on their sale is classified as LTCG.
- **Short-Term Capital Gain:** If they are held for less than 36 months, any gain is classified as Short-Term Capital Gain (STCG).

**3. **Tax Treatment of LTCG:**
- **Tax Rate:** As per Section 10(38) of the Income Tax Act, LTCG on listed securities and units of equity mutual funds are exempt from tax if Securities Transaction Tax (STT) has been paid. However, CPBs are generally not exempt under this section.
- **Tax Rate for CPBs:** For CPBs, if the gain is classified as LTCG, it is taxed at 20% with indexation benefits. If indexation is not claimed, it is taxed at 10% (which is rare for CPBs).

**4. **Indexation:**
- **Applicable:** Indexation is available on LTCG for CPBs. This means that you can adjust the cost of acquisition using the Cost Inflation Index (CII) to account for inflation.
- **Calculation:** The indexed cost of acquisition is calculated as follows:

\[
\text{Indexed Cost of Acquisition} = \text{Cost of Acquisition} \times \left(\frac{\text{CII of Year of Sale}}{\text{CII of Year of Purchase}}\right)
\]

**Example:**
- If you purchased CPBs in the financial year 2015-16 and sold them in 2023-24, you would use the CII for 2015-16 and 2023-24 for the calculation.

**5. **Documentation and Filing:**
- **Proofs:** Maintain all relevant documentation including purchase and sale records, and indexation calculations.
- **Filing:** When filing your income tax return, include the details of the capital gain and apply the appropriate tax rate based on whether indexation is claimed or not.

**6. **Non-Listed CPBs:**
- **Tax Treatment:** If CPBs are not listed, then the tax treatment follows the general rules for capital gains on such securities, which might differ from listed CPBs.

**Summary:**
- **LTCG Tax Rate:** 20% with indexation or 10% without indexation.
- **Indexation Benefits:** Available for LTCG.
- **Documentation:** Keep records of purchase, sale, and indexation calculations.

For specific guidance and calculations based on your exact scenario, consulting a tax advisor or financial expert is recommended.