SEC 112A- LTCG ON SALE OF CERTAIN ASSETS  (Inserted by Finance Act 2018, w.e.f. 01.04.2019)

Concessional rate of tax on transfer of Certain assets:

(A) The above section 112A is applicable on the following circumstances

(a) Long term capital gain arising from transfer of the following assets

(i) an equity share in a company

(ii) a unit of an equity oriented fund or

(iii) a unit of a business trust

(b) Concessional Rate of Tax –     10%

(c) Long Term Capital Gain > Rs. 1,00,000

(B) Conditions

STT should be paid on (i) acquisition and transfer of an equity share of a company, or

(ii) transfer an unit of an equity oriented fund or unit of business trust.

(C) The COA of a listed equity share acquired by the taxpayer before February 1, 2018, shall be        deemed to be the HIGHER of following:

a) The actual cost of acquisition (COA) of such asset; or

b) Lower of following:

(i) Fair market value (FMV) of such shares as on January 31, 2018; or

(ii) Actual Full Value consideration (FVC) accruing on its transfer.

Further if the FVC < FMV, then the COA will be higher of FVC or Actual Cost.

(D)   Adjustment of Basic Exemption Limit

Only a resident individual/HUF can adjust the exemption limit against LTCG after making adjustment of other Income. Thus, a non-resident individual and non-resident HUF cannot adjust the exemption limit against LTCG.

(E) No benefit of Deduction under Chapter VIA against LTCG taxable u/s 112A.
(F) No benefit of Rebate u/s 87A against LTCG taxable u/s 112A.

(G) No benefit of Indexation

A taxpayer who has earned LTCG from transfer of the above assets has two options:

(i) Avail indexation and pay tax at normal tax rate @ 20%, (plus surcharge and cess) ;


(ii) No indexation, and pay tax at concessional rate @ 10% (plus surcharge and cess) u/s 112A.

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  1. Venkatesan says:

    Would LTCG be taxable for the amounts exceeding 1Lac, if the LTCG is, let’s say, approximately, INR3Lac?

    i.e., would the tax be on the incremental INR 2Lac?

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February 2021