Background
The most significant amendment to the Income Tax Act, 1961
("ITA") introduced by the Finance Act,
2018 was the insertion of a provision imposing a long-term capital
gains tax of 10%1 on capital gains (exceeding INR
100,000 (approx. USD 1,500) arising on the transfer of listed
equity shares or units of an equity oriented mutual fund.
The new provision, section 112A, came into effect on April 1,
2018. It was accompanied by the insertion of section 55(2)(ac)
which provided for the value of gains earned up to January 31, 2018
to be grandfathered. A more detailed analysis of the new provision
can be found in our 2018 Budget hotline available
here2.
Earlier, under section 10(38), long-term capital gains on listed
equity shares and units of equity oriented mutual fund i.e., gains
arising on the transfer of such shares and units held for a period
of more than 12 months, were exempt from capital gains tax,
provided that securities transaction tax
("STT") had
