In his budget 2018 speech, Finance Minister Arun Jaitley announced a few key changes to the income tax structure for those who invest in equities and bonds. All these changes will come into effect from April 1, and affect the investors in a number of ways. The Finance Bill 2018 was passed by voice vote in Lok Sabha on March 14. The Finance Bill contains taxation proposals as well as appropriation bill that is a detailed list of spendings. It was the fifth and final complete budget presented by Finance Minister Arun Jaitley. Here’s how new tax changes will impact the equity investments after April 1:
The budget 2018 imposed a tax of 10 percent on the long-term capital gains (LTCG) arising out of equity-linked mutual funds as well as equities if capital gains exceed Rs 1 lakh annually. The investors will not get any indexation benefit. Till January 31 this year, the capital gains made will be grandfathered.
2) Tax on dividend distributed by equity mutual funds
From April 1, a 10 percent tax will be imposed on the income arising out of the dividend distributed by equity-oriented mutual funds.
3) Get exemption by investing in specified bonds
There is a deduction available under section 54EC on the capital gains made from transfer of the long term capital assets invested in the specified long-term assets or any bond at any time inside 6 months after the date of such transfer. Long-term specified asset means any bond, redeemable after 3 years that is issued on or after the 1 April, 2007 by the National Highways Authority of India (NHAI) or by the Rural Electrification Corporation Limited (RECL); or any other bond notified by the Central Government. Now Section 54EC is restricts the exemption on capital gains arising from long-term capital asset transfer.