You can set off long-term capital loss against LTCG earned in next 8 FYs

With the recent introduction of 10% long-term capital gains (LTCG) tax above ₹ 1 lakh, can I carry over long-term capital loss (LTCL)? This capital loss could be offset with future capital gains above ₹ 1 lakh in four subsequent financial years. This will reduce the tax on capital gains. Is that possible with the prevailing law?

— K. Routray

It is presumed that you are referring to the sale of shares /units of an equity-oriented fund in India during FY2018-19 and onwards. Any LTCL incurred by you upon the sale of such a capital asset can be utilised to set off against LTCG arising from any asset in the current financial year. You can also carry forward any unutilised LTCL and set off this loss against capital gains earned in subsequent years (up to eight subsequent financial years).

I read your article on tax implications for people who work in India but get paid by a foreign employer . Salary received from an overseas employer is taxable under which head?

—Udit Kumar Agarwal

The salary received from the overseas employer for an individual being an ordinary resident of India for services rendered in India is taxable under the head income from employer. The same is required to be reported in ‘Schedule S’ of the applicable India tax return form. Please state the address of the overseas employer and select ‘State Outside India’ in the relevant line items under ‘Schedule S’ of the form. 

Earlier in 2018, the finance minister announced tax on sale of shares if profit crosses the value of ₹ 1 lakh. I bought 25 shares of Bajaj Finance five years ago with an average buy price of ₹ 150. Now their value is ₹ 6 lakh (for 250 shares). How will tax be calculated if I sell all these shares and buy new shares? Do I have to pay tax on the profit?

—Arvind Judge

Beginning 1 April 2018, LTCG arising on the sale of shares listed in India that are held for more than 12 months before sale are taxable, to the extent that such LTCG exceeds ₹ 1 lakh in a given tax year, provided securities transaction tax (STT) has been paid both at the time of purchase and sale of shares. A special tax rate of 10% (plus applicable surcharge and cess) is payable on such LTCG exceeding ₹ 1 lakh. 

However, the highest listed price of such shares as on 31 January 2018 (if higher than the sales price) can be considered as the cost of acquisition in place of the actual cost of acquisition, where such listed price is higher than the actual cost of acquisition. 

If you acquired these shares five years ago and paid/will pay STT at the time of purchase and sale, you can opt to use the listed price of the shares as on 31 January 2018 in place of the actual cost of purchase provided the listed price is less than the sale value. The resultant capital gain, to the extent it exceeds ₹ 1 lakh, would need to be taxed at 10% plus applicable surcharge and cess. 

The reinvestment of the gains/sale proceeds in the purchase of new shares does not enjoy any tax exemption. Exemption can be explored for such LTCG taxation if the sales proceeds are re-invested in a residential property in India and subject to satisfaction of other specified conditions relating to such re-investment.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India. Queries and views at mintmoney@livemint.com