LTCG Grandfathered (Capital Gain Report) is a provision in the Indian tax laws that allows for the grandfathering of long-term capital gains made until a certain date. Specifically, for equity shares and equity-oriented mutual funds, any gains made until 31st January 2018 are grandfathered. This means that any gains made until this date will be exempt from the new tax law .
To take advantage of grandfathering, taxpayers need to calculate their long-term capital gains using the fair market value (FMV) of the assets. This means that the cost of acquisition will be the higher of the actual purchase price or the FMV on 31st January 2018. The Capital Gain Report is a form provided by the tax department that taxpayers need to fill in to report their LTCG and avail the benefit of grandfathering.
The purpose of grandfathering is to ensure that investors who had made investments based on the previous tax regime were not penalized by the new tax law. By grandfathering the gains made until a certain date, the government ensures that investors are not subject to double taxation or a sudden change in the tax regime.
Some key points about LTCG Grandfathered (Capital Gain Report) are:
1.It allows for the grandfathering of long-term capital gains made until a certain date.
2.Taxpayers need to fill in the Capital Gain Report form provided by the tax department to report their LTCG and avail the benefit of grandfathering.
3.Grandfathering ensures that investors who made investments based on the previous tax regime are not penalized by the new tax law.
4.The cost of acquisition is calculated using the FMV of the assets.
5.Reporting: Taxpayers are required to report LTCG Grandfathered in their income tax return by filling up the capital gains schedule. They must provide details such as the date of acquisition, the fair market value , and the sale price of the asset to arrive at the taxable capital gain. The income tax department may ask for supporting documents such as purchase bills, sale deeds, and bank statements to verify the information provided.
6.Reinvestment options: Taxpayers can reinvest the LTCG Grandfathered gains in specified bonds issued by the government of India, under Section 54EC of the Income Tax Act, 1961. The investment must be made within six months from the date of sale of the asset, and the maximum investment portfolio management limit is INR 50 Lakhs. The bonds have a lock-in period of five years and offer a fixed rate of interest.
In conclusion, understanding LTCG Grandfathered is crucial for taxpayers who have realized capital gains from the sale of assets acquired before February 1, 2018. They must carefully calculate their taxable capital gains and report them accurately in their income tax returns to avoid penalties and interest charges.
Originally published by: LTCG Grandfathered for Indian Taxpayers