Change in Section 10(38) of Income Tax Act: Long-term capital gains taxSection 10(38) of the Income Tax Act has the provision of exemption of long-term capital gains tax from sale of equity shares or equity mutual funds if Security Transaction Tax (STT) is paid on the investment. The investors who directly invest in equity and investors in equity-based mutual funds are required to note that in Budget 201,7 the provision in response of Section 10 (38) has been modified. It has been proposed that exemption of Section 10 (38) can be availed for equity shares purchased after 1st October 2004, only if STT has been paid on purchase.
This revised provision will come into force from 1st April 2017. All equity investors may kindly note this significant change in the Income Tax Act. So, listed shares acquired by off-market route (as for example, gifted by relatives, friends, etc. where STT is not paid) will attract long-term capital gains tax at the rate of 10% if sold on or after 1st April, 2017.