Article explains Taxability of capital gain on sale of Securities like – Listed or Unlisted equity Shares, Mutual funds or bonds and Cost of Acquisition in case of original shares, Bonus Shares, Right Shares, Right Entitlement and Preference shares.
Taxability of capital gain on sale of Securities like – Listed or Unlisted equity Shares, Mutual funds or bonds –
| Section 112 | Section 112A | Section 111A |
| 1. Section 112 is applicable on sale of long term capital Assets.
[Preference shares, Debt oriented Mutual Funds, Bonds are covered under this section or normal provisions of short term capital gains nether in 111A nor 112A] |
1. Section 112A is applicable on long term capital gain on sale of–
(i) Equity shares, units of EOMF or unit of business trust; and, (ii) – STT has been paid on acquisition & Transfer of equity shares; or, – STT has been paid on Transfer of EOMF or units of business trust [The 2nd Condition will not applicable to a transfer undertaken on RSE located in IFSC and consideration receivable in foreign currency] [The 2nd Condition will not applicable if Shares are acquired before 01/10/2004] |
1. Section 111A is Applicable on Short term capital gain on sale of –
(i) Equity share, Unit of EOMF or unit of business trust and such transection is chargeable to STT. [The Condition of paying STT will not applicable to a transfer undertaken on RSE located in IFSC and consideration receivable in foreign currency] [The 2nd Condition will not applicable if Shares are acquired before 01/10/2004] |
| 2. Period of Holding Section 2(42A)–
For listed securities – More than 12 Months For Unlisted Share – More than 24 Months For Debt Funds & Bonds- More than 36 Months |
2. Period of Holding Section 2(42A)–
For listed securities – More than 12 Months
|
2. Period of Holding Section 2(49A)–
For listed securities – Upto 12 Months |
| 3. Tax Rate –
(a) In case of Resident Individual or HUF or Domestic Company – 20 % (b) In case of Non resident or a foreign Company – – LTCG on unlisted securities of a company not being a company in which public is substantially interested (closely held Co.) – 10% (After giving effect of 1st & 2nd proviso to sec. 48 (c) In case of any other resident – 20% Rebate under section 87A will be allowed. |
3. Tax Rate –
10% on LTCG exceeding one lakh rupees. Rebate under section 87A NOT will be allowed.
|
3. Tax Rate – 15% on STCG.
Rebate under section 87A will be allowed.
|
| 4. Deductions U/s 80C to 80U not allowed from LTCG u/s 112 | 4. Deductions U/s 80C to 80U not allowed from LTCG u/s 112A | 4. Deductions U/s 80C to 80U not allowed from STCG u/s 111A |
| 5. Minimum Exemption Slab – Yes | 5. Minimum Exemption Slab – Yes (only to Resident) | 5. Minimum Exemption Slab – Yes (only to Resident) |
| 6. Cost of Acquisition: Sec 55(2) Clause (b)–
– If acquired before 01/04/2001 • Money Paid or Payable or, • FMV as on 01/04/2001 Whichever is Higher – If acquired after 01/04/2001 • Money Paid or Payable will be the COA
|
6. Cost of Acquisition: Sec 55(2) clause (ac)–
– If acquired before 01/02/2018 • Money Paid or Payable or, • FMV as on 31.01.2018 or selling price w.e. is Less will be the COA Whichever is Higher [In case shares were not listed as on 31.01.2018 and the same has been listed on the date of trf. Then COA will be Indexed upto FY 2017-18] – If acquired after 01-02-2018 • Money Paid or Payable will be the COA |
6. Cost of Acquisition: Sec 55(2) Clause (b)–
– If acquired before 01/04/2001 • Money Paid or Payable or, • FMV as on 01/04/2001 Whichever is Higher – If acquired after 01/04/2001 • Money Paid or Payable will be the COA
|
| 7. 1st Proviso of Sec. 112(1) & 2nd Proviso of Section 48
Tax payable on LTCG on sale of Listed securities (other than units) or Zero-coupon bonds Exceeds 10% of the amount of capital gain before Indexation, then such excess amount of tax payable shall be ignored for computing tax payable by the assessee. (Simply means, Assessee may choose to pay 10% tax on listed Securities without indexation instead of 20% tax with Indexation) |
7. 3rd Proviso of Section 48
Indexation of Cost of Acquisition will not be allowed under this section |
7. 2nd Proviso of Section 48
Indexation of Cost of Acquisition will not be allowed under this section |
| 8. Surcharge – Max 15 % (Proposed in Finance Act 2022) | 8. Surcharge – Max 15 % | 8. Surcharge – Max 15 % |
| 9. 7th Proviso of Section 48 –
No Deduction will be allowed for amount paid on Account of STT |
9. 7th Proviso of Section 48 –
No Deduction will be allowed for amount paid on Account of STT |
9. 7th Proviso of Section 48 – No Deduction will be allowed for amount paid on Account of STT |
Also, Section 112A starts with the Words “Not with standing anything contained Under section 112”, It means Provisions of Section 112A has overriding effect on section 112.
Cost of Acquisition in case of original shares, Bonus Shares, Right Shares, Right Entitlement and Preference shares
| Type of Share | Cost of Acquisition | Period of Holding Starts from |
| 1. Original Shares
|
Actual cost paid or payable by the assessee | From the date of Allotment of shares |
| 2. Bonus Shares | -NIL (If allotted on or after 01/04/2001)
-FMV as on 01.04.2001 (If allotted before 01/04/2001) -FMV as on 31.01.2018 (If section 112A is applicable) |
From the date of Allotment of shares |
| 3. Right Entitlement | NIL | From date of offer – Always STCG |
| 4. Right Shares | Cost paid or payable +
Cost paid for Right entitlement (if any) |
From the date of Allotment of Right Shares |
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