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Budget 2018 and LTCG

by | Feb 2, 2018 | Finance, Taxes

Even though the country was expecting it, it felt like a bomb when Mr.Jaitley reintroduced the LTCG on Shares and Equity Mutual Funds.

Here are the details.

The LTCG is 10%. No indexation benefits are available for the calculation of this LTCG. However, the gains are ‘grandfathered’ upto 31st Jan 2018.

What this means is that even if one has bought the Equity Mutual Funds say, 10 years back at a NAV of Rs.20. Say now it has a NAV of Rs.250 and one sells it at this price, then the capital gains should be (250 – 20) x 10% = Rs.23. But this would not be fair, since the rule came out only on the 1st of Feb, 2018, so instead of the original buying price of Rs.20, the actual value (highest value in case of a stock) on the 31st of January 2018 will be considered as the buying price. Say, the NAV of the MF was Rs.240 on 31st January 2018, then the capital gains will be (250 – 240) x 10% = Re.1.

There is another part to this rule – the LTCG is applicable only for gains above Rs.1 lac. To take advantage of this exemption, I suggest that one should analyse the investments and over a financial year, should sell some MFs / Shares and book profit of Rs.1 lac in the year, even if the money is not needed. One can buy back the MF / Shares immediately. The advantage is the increase in the buying price (on paper) without paying any tax and when one eventually sells those MFs / Shares, the tax incidence will be much lower.


Niranjan Bangera


  1. Tony D'Gama

    Hi Niranjan,
    Thanks for the info. Keep it up!
    Pls notify me of new posts.
    Thanks & regards.

    • niranjan

      Thanks, Sir. For future posts, please go to and click on subscribe. You will be notified immediately of any future posts once you verify your email ID


    Hello Niranjan,
    Thanks for the info on grandfathering of LTCG. You have explained it so simply in lay man’s terms. Also for the info on redemption of MFs or shares.

  3. Vijay Kakkar

    Hi Niranjan,
    Thanks for starting this informative site.

  4. Arun Agarwal

    Dear Niranjan,
    The name is just sutitable to most of us. Thanks gor your advice.

  5. Dilip

    Niranjan-What is tax applicable on LTCG If sold before 31-03-2018?
    E.g. Purchase ₹ 100000 say Jan 2015 value on 31.01.2018 ₹200000 and sold on say 10.03.2018 ₹310000.

    • niranjan

      Dilip, as per my opinion of the new law. Anything sold before 1st April 2018 will not be under the new law of LTCG. Hence, zero LTCG.

      • lui Vyas

        why do they say that the trades till the date of the last budget are grand fathered.
        Why not say in simple terms that the LTCG becomes applicable from 1stApril 2018.

  6. lui Vyas

    Please ignore my above query. Already got it clarified.


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Written By: niranjan

Financially Stupid Niranjan


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