Equity LTCG Tax With Grandfathering Explained: Video + Calculator

Published: April 14, 2018 at 10:14 am

Last Updated on

Here is a simple way to understand how grandfathering works when calculating LTCG tax on equity instruments. Download a free equity LTCG tax calculator to estimate the tax to be paid before you withdraw from an equity mutual fund, You can also use it to calculate STCG, and it will work with debt mutual funds also. The calculator presented here is an update to the Mutual Fund Capital Gains Calculator. The main advantage of this calculator is that you can estimate LTCG or STCG tax to be paid before you make a withdrawal.

Let us now discuss Equity LTCG Tax with grandfathering with a video. The idea is to understand the concept of grandfathering without any math in a visual way so that we can sell at appropriate times to reduce tax. For example, if you wish to switch from regular funds to direct funds, now would be a perfect time to do so. Why? Because the current NAV of almost all equity funds (except arbitrage funds) would be lower than the NAV on Jan 31st 2018. So if you sell or switch, you will not have to pay LTCG tax.

Equity LTCG Tax With Grandfathering Explained: Video

Here are three examples discussed in the video. More examples can be found: Long Term Capital Gains Taxation from Equity: Examples (Budget 2018-2019) and Equity LTCG Taxation: How much tax do I need to pay? Illustration part 1

Equity LTCG Tax when NAV on sell-date is higher than NAV on Jan 31st, 2018

Equity-LTCG-tax-with-grandfathering-example-1Note that you will have to pay tax only if the sum of all such taxable LTCG (as shown above) across all your equity investments is above Rs. 1 Lakh in a particular financial year. If it is above Rs. one lakh, you will have to pat 10% tax with 4% cess on the amount exceeding one lakh. So for the next few years, the taxation amount will be pretty low for most of us. If you wish to see a detailed example see: Generating tax free income from arbitrage mutual funds

Equity LTCG Tax when NAV on sell-date is lower than NAV on Jan 31st, 2018

Equity-LTCG-tax-with-grandfathering-example-2

Please note that that effective LTCG in this case =0. There is no loss here.

Equity LTCG Tax when NAV on sell-date is lower than NAV on buy-date

Equity-LTCG-tax-with-grandfathering-example-3

This is an actual loss. The sell-NAV is lower than the purchase-NAV (or stock price). You can use this to reduce LTCG from other instruments (incl equity). If you do not have LTCG then you can report this LTCL and carry it forward for the next 8 financial years and offset it when possible.

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Additional resources on Equity LTCG taxation

Equity LTCG Taxation: How much tax do I need to pay? Illustration part 1

Should I book profits each year to lower Equity LTCG Tax?

Equity LTCG Tax With Grandfathering Calculator

Many people find it hard to believe but the above calculations have to be performed for each unit or stock sold. So if you have a SIP running, or multiple investments, then you will have to enter all transactions. There is no other way around! Please check the calculations presented and compare it the AMC CG statement. Consult a CA for clarification. If you notice any issues, let me know. Here are a couple of screenshots.

Equity-LTCG-tax-with-grandfathering-calculator-screenshot-1

Equity-LTCG-tax-with-grandfathering-calculator-screenshot-2

 

Download the Equity LTCG Tax With Grandfathering Calculator

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Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com

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7 Comments

  1. Can you please make a portfolio tracker where you can track the progress of individual stock like you made the stock analysis sheet which can be updated on real time basis
    It would be really helpful for all your of us

  2. Dear Professor /Pattu,
    Little confused as trying to match below statement with details mentioned by you. Confusion is about LTCG. IF i sold in Sep 2017, How come there will be LTCG? Or i misunderstood , Grandfathering?

    Sorry i am unable to copy/paste picture here. Failed to share the problem statement.

  3. Sir,

    I have downloaded this calculator, but i am facing problem.

    While clicking the Update NAV, upon clicking, the existing excel file is being closed and and fresh new blank excel sheet is getting open.

    I have office 2013 version.

    what should I do?

  4. Dear Mr M.Pattabiraman,

    Can you please send me a link to Download “Equity LTCG Calculator with Grandfathering”(Only For Stocks) as I could not get the said link in your article.
    I have already downloaded calculator from link for calculating LTCG on Mutual Funds.
    Thanks & Regards,
    Vijay Dighe

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