Section 112A - Tax on long-term capital gains in certain cases - Income Tax - Ready Reckoner - Income Tax

Section 112A - Tax on long-term capital gains in certain cases Concessional rate of tax of LTCG on transfer of certain assets The new section 112A has been inserted in order to levy long-term capital gain tax on the transfer of equity share, units of equity oriented funds and units of the business trust. Before Assessment Year 2018-2019, long-term capital gain tax on transfer of equity share, units of equity oriented funds and units of business trust was exempted as per provisions of section 10(38) - With effect from 1st April, 2018, provisions of section 10(38) will not be applicable to any income arising from transfer of equity share, units of equity oriented funds and units of business trust. Conditions for availing the benefit of he concessional rate are - (a) In case of equity share in a company , STT has been paid on acquisition and transfer of such capital assets. (b) In case of unit of an equity oriented fund or unit of business trust, STT has been paid on transfer of such capital assets. Accordingly, the central government has, vide notification no. 60/2018 , dated 01.10.2018 notified that the condition of chargeability of STT shall not apply to the acquisition equity of share entered into Before 1st October 2004 or on or after 1st October 2004 which are not chargeable to STT, other than the following transaction. - (a) where acquisition of existing listed equity share in a company whose equity shares are not frequently traded in a recognised stock exchange of India is made through a preferential issue: - (b) where transaction for acquisition of existing listed equity share in a company is not entered through a recognised stock exchange in India. This section is applicable from 1st April, 2018 (A.Y. 2019-2020). The transfer of equity share, units of equity oriented funds and units of business trust shall be governed by the provisions of section 112A from the effective date. Section 112A shall be applicable only in case where STT has been paid at the time of transfer, and also on an acquisition in case of equity share / units of equity oriented funds. Adjustment of unexhausted Basic Exemption Limit In case of Individual or HUF, If the basic exemption is not fully exhausted by any other income, then such long term capital gain exceeding ₹ 1 lakhs will be reduced by the unexhausted basic exemption limit and only the balance would be taxed at 10% Threshold Limit From 23/07/2024 [ Amended vide Finance (No. 2) Act, 2024 ] income-tax calculated on such long-term capital gains exceeding ₹1,25,000/- (a) on long-term capital gains at the rate of 10% for any transfer which takes place before the 23rd day of July, 2024; and (b) on long-term capital gains, at the rate of 12.5% for any transfer which takes place on or after the 23rd day of July, 2024: the limit of ₹ 1,25,000/- shall apply on aggregate of the long-term capital gains under above clauses (a) and (b). Upto 22/07/2024 Income-tax calculated on such long-term capital gains exceeding ₹1,00,000/- long-term capital gain tax @10% shall be levied. NOTE:- Benefit of indexation In case of NRI , benefit of indexation and benefit of calculation of capital gain in foreign currency will not be allowed in cases where section 112A is applicable. In case of Resident, First and second proviso to section 48 i.e. benefit of indexation of cost of acquisition and cost of improvement shall not be allowed while calculating long term capital gain tax under section 112A . Cost of acquisition for the assets acquired before 1st February, 2018, shall be higher of (a) and (b) (a) The actual cost of acquisition, and (b) lower of (i) and (ii) (i) fair market value of such assets and (ii) the full value of consideration received or accruing as a result of the transfer of the capital asset. No deduction under chapter VI-A ( Deductions under Section 80C to 80U ) against taxable under section 112A No benefit of rebate under section 87A against LTCG under section 112A.