Article explains with examples Tax on long term capital gains on Sale of Listed equity share in a company or on unit of an equity oriented fund in view of recent amendment proposed vide union budget 2018 by proposing amendment in Section 112A of the Income Tax Act, 1961.
The proposed new section 112A provides that where the total income of an assessee, includes any income chargeable under the head “Capital gains”, arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, subject to the conditions specified under the section, the tax payable by the assessee on the capital gains exceeding one lakh rupees shall be calculated at the rate of ten per cent.
It is further proposed to provide that in the case of an individual or a Hindu undivided family, being a resident, 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.
It is also proposed to provide that capital gains under the said section shall be computed without giving effect to the first and second proviso to section 48.
It is also proposed to provide that the cost of acquisition for the purposes of computing capital gains under the section in respect of capital asset acquired by the assessee before the 1st day of February, 2018, shall be as provided in the said section.
The cost of acquisition for the purposes of computing capital gains referred to in sub-section (1) in respect of the long-term capital asset acquired by the assessee before the 1st day of February, 2018, shall be deemed to be the higher of-
(i) the actual cost of acquisition of such asset; and
(ii) the lower of-
(a) the fair market value of such asset; and
(b) the full value of consideration received or accruing as a result of the transfer of the capital asset.
Where the gross total income of an assessee includes any long-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.
“fair market value” means,-
(i) in a case where the capital asset is listed on any recognised stock exchange, the highest price of the capital asset quoted on such exchange on the 31st day of January, 2018:
It is also proposed to provide that where the gross total income of an assessee includes any long-term capital gains, deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.
It is also proposed to provide that where the total income of an assessee includes any long-term capital gains referred to in the said section, the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.
This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent years.
LONG TERM CAPITAL GAIN:=
Assessment Year 2018-19
| Date of acquision | No of Shares | Rate per share | Total Cost |
| 01-04-2010 | 1000 | 10 | 10000 |
| Date of Sales | No of Shares | Rate per share | Total Value |
| 20-02-2018 | 1000 | 400 | 400000 |
| Long Term Capital Gain | 390000 | ||
| LTCG fully exempt u/s 10 (38) | 390000 |
The is so because the new section 112A is effective from 01-04-19 only i.e from AY 2019-20.
Assessment Year 2019-20
| Date of acquision | No of Shares | Rate per share | Total Cost | FMV on 31-01-18 |
| 01-04-2010 | 1000 | 10 | 10000 | 400 |
| i.e. | ||||
| 400000 | ||||
| Date of Sales | No of Shares | Rate per share | Total Value | |
| 30-06-2018 | 1000 | 600 | 600000 | |
| Long Term Capital Gain | ||||
| Sale Value | 600000 | |||
| Less: FMV | 400000 | |||
| Long Term Capital Gain | 200000 | |||
| Exempt LTCG | 100000 |
Assessment Year 2019-20
| Date of acquision | No of Shares | Rate per share | Total Cost | FMV on 31-01-18 |
| 01-04-2010 | 1000 | 10 | 10000 | 400 |
| i.e. | ||||
| 400000 | ||||
| Date of Sales | No of Shares | Rate per share | Total Value | |
| 30-03-2018 | 500 | 450 | 225000 | |
| 30-06-2018 | 500 | 600 | 300000 | |
| Long Term Capital Gain AY 18-19 | ||||
| Sale Value | 225000 | |||
| Less: Cost | 5000 | |||
| Long Term Capital Gain | 220000 | |||
| Exempt LTCG A.Y. 18-19 | 220000 | |||
| Long Term Capital Gain AY 19-20 | ||||
| Sale Value | 300000 | |||
| Less: FMV 31-01-18 | 200000 | |||
| Long Term Capital Gain | 100000 | |||
| Exempt LTCG A.Y. 19-20 | 100000 |
—
| Computation of Total Income | AY 2019-20 | ||
| Scenario 1: Reduced Total Income >Rs. 500000 | |||
| Income from Business | 700000 | ||
| Long Term Capital Gain | 200000 | ||
| Gross Total Income | 900000 | ||
| Less: LTCG (Treated seperately) | -200000 | ||
| Reduced GTI | 700000 | ||
| Less: Deductions u/s 80 C etc. | -100000 | ||
| Reduced Total Income | 600000 | ||
| Income Tax | 32500 | ||
| Less: Rebate u/s 87A | 0 | ||
| 32500 | |||
| Cess 4% | 1300 | ||
| Total Tax on Normal Income | 33800 | ||
| Income from Capital Gain | |||
| Long Term Capital Gain | 200000 | ||
| Less: Exempt | -100000 | ||
| Taxable Capital Gain 10% | 100000 | ||
| Income Tax | 10000 | ||
| Cess 4% | 400 | ||
| Total Tax on LTCG | 10400 | ||
| Total Tax Payable | 44200 | ||
| Scenario 2: Reduced Total Income < Rs. 500000 | |||
| Income from Business | 500000 | ||
| Long Term Capital Gain | 200000 | ||
| Gross Total Income | 700000 | ||
| Less: LTCG (Treated seperately) | -200000 | ||
| Reduced GTI | 500000 | ||
| Less: Deductions u/s 80 C etc. | -100000 | ||
| Reduced Total Income | 400000 | ||
| Income Tax | 7500 | ||
| Less: Rebate u/s 87A | -5000 | ||
| 2500 | |||
| Cess 4% | 100 | ||
| Total Tax on Normal Income | 2600 | ||
| Income from Capital Gain | |||
| Long Term Capital Gain | 200000 | ||
| Less: Exempt | -100000 | ||
| Taxable Capital Gain 10% | 100000 | ||
| Income Tax | 10000 | ||
| Cess 4% | 400 | ||
| Total Tax on LTCG | 10400 | ||
| Total Tax Payable | 13000 | ||
| Scenario 3: Reduced Total Income < Rs. 250000 | |||
| i.e. Minimum taxable income | |||
| Income from Business | 300000 | ||
| Long Term Capital Gain | 200000 | ||
| Gross Total Income | 500000 | ||
| Less: LTCG (Treated seperately) | -200000 | ||
| Reduced GTI | 300000 | ||
| Less: Deductions u/s 80 C etc. | -100000 | ||
| Reduced Total Income | 200000 | ||
| Add: Income from LTCG | |||
| (To make it = Rs. 250000 | 50000 | ||
| Total Income | 250000 | ||
| Income Tax | 0 | ||
| Less: Rebate u/s 87A | 0 | ||
| 0 | |||
| Cess 4% | 0 | ||
| Total Tax on Normal Income | 0 | ||
| Income from Capital Gain | |||
| Long Term Capital Gain | 200000 | ||
| Less: Exempt | -100000 | ||
| Long Term Capital Gain | 100000 | ||
| Shifted to Normal Computation | -50000 | ||
| 50000 | |||
| Income Tax | 5000 | ||
| Cess 4% | 200 | ||
| Total Tax on LTCG | 5200 | ||
| Total Tax Payable | 5200 | ||
| Scenario 4: Reduced Total Income = Nil | |||
| i.e. Minimum taxable income | |||
| Income from Business | 50000 | ||
| Long Term Capital Gain | 500000 | ||
| Gross Total Income | 550000 | ||
| Less: LTCG (Treated seperately) | -500000 | ||
| Reduced GTI | 50000 | ||
| Less: Deductions u/s 80 C etc. | -50000 | ||
| Reduced Total Income | 0 | ||
| Add: Income from LTCG | |||
| (To make it = Rs. 250000 | 250000 | ||
| Total Income | 250000 | ||
| Income Tax | 0 | ||
| Less: Rebate u/s 87A | 0 | ||
| 0 | |||
| Cess 4% | 0 | ||
| Total Tax on Normal Income | 0 | ||
| Income from Capital Gain | |||
| Long Term Capital Gain | 500000 | ||
| Less: Exempt | -100000 | ||
| Long Term Capital Gain | 400000 | ||
| Shifted to Normal Computation | -250000 | ||
| 150000 | |||
| Income Tax | 15000 | ||
| Cess 4% | 600 | ||
| Total Tax on LTCG | 15600 | ||
| Total Tax Payable | 15600 | ||
Download above Examples in Excel Sheet.
Compiled by: CA LALIT MUNOYAT, B.Com.(Hons.),CS,FCA, DISA, @ [email protected] # 98201 93508
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Author Bio
I am resident individual govt retired officer My total income incl LTCG Rs 8721 is Rs 506202 for FY 2021/22 can i avail tax exemption u/s 87/A?
Would assessee be eligible for rebate 87A on stcg if assessee also has LTCG u/s 112A
Is New format applicable only, where there is LT Capital Gain ? Where there is LT capital loss, does indexation still available ? Exemption of first 1lac and reduced taxation of 10%, will be relevant only when there is LT capital Gain. Hence this query
If shares were purchased in the 1970’s when there was no STT and STT has been paid on sale in August 1980, then will section 112A apply and if not, how is the capital gains to be calculated.
If loss from equity shares on which SST is paid u/s 112A how the ITR will be filled in LTCG window ?please clarify. Mobile 9861233101/
7978981506
what will be the rate of long term capital gains tax on sale of pvt ltd company shares which is naturally unlisted and whether indexation is allowed .kindly give simple and clear reply thanks a lot
please tell if we sell private ltd. company shares, which are naturally unlisted ,what will be the long term capital gains tax and if any indexation is allowed
Scenario 2: Reduced Total Income < Rs. 500000. Sir, you have given deduction of Rs 5000 u/s 87 A, but deduction is allowable max Rs. 2500 if total income is Rs.350000/-. In this example total income is Rs.400000/-. Please clarify.
As the LTCG on equity shares will be taxable from AY 2019-20, Can I carry forward my LTCL on equity shares booked for AY 2018-19 and set off against LTCG in next 8 years? If yes, how to fill LTCL in ITR for AY 2018-19?
What will be the cost to be considered if the shares are inherited after 1st April 2018?
sir
rebate u/s 87A is restricted to Rs 2500/- and applicable where the total income does not exceeds rs 350000/-
We purchased UTI Master shares in 2000( units 1000)
Suppose we sell before 31/3/2018, will it attract long term capital Tax ( capital gain is about Rs.1000.00)
Suppose we sell it on 01/06/18 (with capital gain Rs.1500.00) how much tax is payable?
2 Is it necessary to DEmat the M.F investments for selling them now ? If they are not in Demat form can we sell them now ? Please clarify
Radhakrishnan
very well explained
Hello Sir
Do we have any exemptions (Sec54) for the LTCG U/S 112A
Kindly reply and thanks in advance
Sir, please arrange to give examples on Taxation of SIP considering current market scenario as looking to the imposed 10% Tax on LTCG if peoples opt out for withdrawal of SIP or will continue SIP then what will be the tax effect
Awaiting best detailed reply as explained above
very CLEAR EXAMPLES. THANK YOU.