BUDGETARY CHANGES IN CHAPTER XII OF INCOME TAX ACT, 1961

[Mr. M. GOVINDARAJAN]

Chapter XII of the Income Tax Act, 1961 (‘Act’ for short) provides the procedure for determination of income tax in certain cases.  This chapter contains Section 110 to 115.  In this article we may see the budgetary charges in Chapter XII of the Act.

Amendment of Section 111A

Section 111A deals with the tax on short term capital gains in certain cases.  The Finance Bill substituted first proviso to section 119A(1) by the following-

the tax payable by the assessee on the total income shall be the aggregate of-

1. the amount of income-tax calculated on such short-term capital gains–

1. at the rate of 15% for any transfer which takes place before the 23.07.2024; and
2. at the rate of twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;

2. the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee.

Amendment to Section 112

Section 112 of the Act provides for the tax payable by the following-

1. Individual or Hindu Undivided Family;
2. Domestic company;
3. Nonresident (not a foreign company) or a foreign company;
4. In any other case of a resident

arising from the transfer of long-term capital assets, chargeable under the head ‘Capital gains’.

Clause 30 of the Finance Bill substituted new clauses for the existing Section 112 (1)(a), (b), (c),(d) and the first proviso.

Section 112(1)(a) provides that in the case of an individual or a Hindu undivided family, being a resident, -

1. the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been his total income; and
2. the amount of income-tax calculated on such long-term capital gains, –

1.  at the rate of 20% for any transfer which takes place before the 23.07.2024; and
2. at the rate of 12.5%. for any transfer which takes place on or after the 23.07.2024,

where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate as applicable in sub-clause (ii);

Section 112 (1)(b) provides that in the case of a domestic company,-

1. the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
2. the amount of income-tax calculated on such long-term capital gains,–

1. at the rate of 20% for any transfer which takes place before the 23.07.2024; and
2. at the rate of 12.5%. for any transfer which takes place on or after the 23.07.2024,

Section 112(1) (c) provides that in the case of a non-resident (not being a company) or foreign company,—

1. the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income; and
2.  the amount of income-tax calculated on such long-term capital gains, -

1. at the rate of 20% for any transfer [other than a transfer referred to in sub-clause (iii)] which takes place before the 23.07.2024; and
2. at the rate of 12.5% for any transfer which takes place on or after the 23.07.2024,

3. the amount of income-tax on long-term capital gains arising from the transfer of a capital asset which takes place before the 23.07.2024, being unlisted securities or shares of a company not being a company in which the public are substantially interested, calculated at the rate of 10% on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48.

Section 112(1)(d) provides that in case of a resident-

1. the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income; and
2. the amount of income-tax calculated on such long-term capital gains,–

1. at the rate of 20% for any transfer which takes place before the 23.07.2024; and
2. at the rate of 12.5% for any transfer which takes place on or after the 23.07.2024.

Where the tax payable in respect of any income arising from the transfer of a long-term capital asset which takes place before the 23.07.2024, being listed securities (other than a unit) or zero coupon bond, exceeds 10% of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.

Amendment of Section 112A

Clause 31 of the Finance Bill amends Section 112(2)(i) of the Act.  The said section was substituted by a new one.  The newly substituted Section 112(2)(i) of the Act provides that the amount of income-tax calculated on such long-term capital gains exceeding Rs.1,25,000/-

1. on long-term capital gains at the rate of 10% for any transfer which takes place before the 23.07.2024; and
2. on long-term capital gains, at the rate of 12.5% for any transfer which takes place on or after the 23.07 2024.

The limit of Rs.1,25,000/- shall apply on aggregate of the long-term capital gains under sub-clauses (a) and (b).

Amendment of Section 113

Section 113 deals with the tax in case of block of assessment of search cases.  Section 113 provides that the total undisclosed income of the block period, determined under section 158BC, shall be chargeable to tax at the rate of 60%.

Provided that the tax chargeable under this section shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A.

Clause 32 of the Finance Bill omitted the words ‘undisclosed’ and ‘and applicable in the assessment year relevant to the previous year in which the search is initiated under section 132 or the requisition is made under section 132A’.

Amendment of Section 115AB

Clause 33 of the Finance Bill amends Section 115AB (ii) as-

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, –

(A) at the rate of 10% for any transfer which takes place before the 23.07.2024; and

(B) at the rate of 12.5%. for any transfer which takes place on or after the 23.07.2024.

Amendment of Section 115AC

Clause 34 of the Finance Bill substitutes sub section (1) clause (ii) the following-

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, included in the total income, -

(A) at the rate of 10% for any transfer which takes place before the 23.07.2024; and

(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23.07.2024.

Amendment to Section 115ACA

This section deals with the tax on income from global depository receipts purchased in foreign currency or capital gains arising from their transfer.  Clause 35 of the Finance Bill substitutes sub section (1) clause (ii) the following-

(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (b), if any, included in the total income, -

(A) at the rate of 10% for any transfer which takes place before the 23.07.2024; and

(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23.07.2024.

Amendment to Section 115AD

Section 115AD of the Act deals with the tax on income of Foreign Institutional Investors from securities or capital gains arising from their transfer.  Clause 36 of the Finance Bill substitutes a new proviso for the existing one under Section 115AD (1) clause (ii) and (iii).

The amended proviso to Section 115AD(1) clause (i) provides that the amount of income-tax calculated on the income by way of short-term capital gains referred to in section 111A shall be at the rate of–

(A) 15% for any transfer which takes place before the 23.07.2024; and

(B) 20% for any transfer which takes place on or after the 23.07.2024.

The amended proviso to Section 115AD (2) clause (iii) provides that in case of income arising from the transfer of a long-term capital asset referred to in section 112A which exceeds Rs.1,25,000/-, income-tax shall be calculated at the rate of–

(A) 10% where transfer of such asset takes place before the 23.07.2024; and

(B) 12.5% where transfer of such asset takes place on or after the 23.07.2024.

The limit of Rs.1,25,000/- mentioned in the first proviso shall apply on aggregate of the long-term capital gains referred to in clauses (A) and (B).

Amendment of Section 115BAC

Clause 37 of the Finance Bill substitutes a new sub section for Section 115BAC(1A) for the existing one with effect from 01.04.2025.  The newly substituted Section 115BAC(1A) provides that he income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6),–

1. for any previous year relevant to the assessment year beginning on the 01.04.2024, shall be computed at the rate of tax given in the following Table, namely-

TABLE

Sl. No.	Total income	Rate of tax
(1)	(2)	(3)
1.	Upto Rs. 3,00,000	Nil
2.	From Rs. 3,00,001 to Rs. 6,00,000	5%
3.	From Rs. 6,00,001 to Rs. 9,00,000	10%
4.	From Rs. 9,00,001 to Rs. 12,00,000	15%
5.	From Rs. 12,00,001 to Rs. 15,00,000	20%
6.	Above Rs. 15,00,000	30%

2. for any previous year relevant to the assessment year beginning on or after the 01.04.2025, shall be computed at the rate of tax given in the following Table, namely: —

TABLE

Sl. No.	Total income	Rate of tax
(1)	(2)	(3)
1.	Upto Rs. 3,00,000	Nil
2.	From Rs. 3,00,001 to Rs. 7,00,000	5%
3.	From Rs. 7,00,001 to Rs. 10,00,000	10%
4.	From Rs. 10,00,001 to Rs. 12,00,000	15%
5.	From Rs. 12,00,001 to Rs. 15,00,000	20%
6.	Above Rs. 15,00,000	30%