Taxation on Sale of Shares or any other Securities

Securities includes Listed Equity Shares, equity oriented units or units of business trust.

Taxation of Securities are depends on the following-

1. Period of Holding of Security 

  • 12 Months or less- Tax as per Section 111A
  • More than 12 Months- Tax as per Section 112

2. Conditions of Section 112A

  • If Satisfied- Tax as per provisions of Section 112A
  • If not Satisfied- Tax as per provisions of Section 112

We will discuss every Section in detail with illustrations.

Section 112A- LTCG on Sales on Securities

Conditions

1. Sale of Equity Shares, Equity oriented Units and Units of Business Trust

2. STT (Securities Transaction Tax) has been paid on both Purchase and Sale of Equity Share & On only sale of Units.

3. Sale must be taken place after 01/04/2018

If the above conditions are satisfied then Capital Gain shall be computed as per provisions of Section 112A.

In other Cases, Capital Gain shall be computed as per Section 112.

Now, Lets see How tax is computed under Section 112A and 112

Points Section 112A Section 112
Tax Rate 10% above Rs. 1 Lakh Flat 20%
Indexation Benefits Not Available Available
How to Compute CG As per Special Provisions of Section 112A
Refer Provisions explained below
As per Normal Provisions of Section 48
Refer Provision explained Below
Rebate U/S 87A Available Not Available

Computation under Section 112A
Full Value of Consideration  XXX
Less: Expenses on Transfer (XXX)
Net Consideration  XXX
Less: Cost of Acquisition
Higher of
A) Actual Cost of Acquisition XXX
B) Lower of XXX
     a) Sales Consideration xxx
     b) FMV as on 31.01.2018 xxx (XXX)
LTCG under Section 112A  XXX
Less: 1,00,000
Tax on Balance Amount @ 10% XXX

Computation under Section 48
Full Value of Consideration  XXX
Less: Expenses on Transfer (XXX)
Net Consideration  XXX
Less: Index Cost of Aquisition (XXX)
LTCG under Section 48 (XXX)

How to Compute FMV as on 31.01.2018

Situations FMV
Shares are listed & Traded on 31.01.2018 Highest Traded Price as on 31.01.2018
Shares are listed & not traded on 31.01.2018 Highest Traded Price as any Previous Traded Day
Units NAV as on 31.01.2018

Section 111A How to Compute Short Term Capital Gain on Sale of Securities (Hold for 12 months or less)

Capital Gain on sale of Securities which is hold for 12 months or less, shall be taxed [email protected] 15%

Lets take an example for Taxability under Section 112A & Section 112

Mr. A has purchased 1,000 Equity shares of XYZ Ltd on 01-04-2009 at the Price of Rs. 200/- per Share. Total Consideration paid is Rs. 2,00,000

Mr. A has purchased another 500 shares at Rs. 210 on 31-12-2015. Total Consideration paid is Rs.1,05,000

Mr. A sold all the 1500 shares on 31-12-2019 for Rs. 420 per Share.

FMV of Shares of XYZ Ltd as on 31.01.2018 was Rs. 295

Brokerage Paid was Rs. 20,000

CII for 2018-19- 282

CII for 2014-15- 240

CII for 2009-10- 148

Lets how Capital Gain is computed in the above case.

Computation under Section 112A

Full Value of Consideration 6,30,000
Less: Expenses on Transfer  20,000
Net Consideration  6,10,000
Less: Cost of Aquisition  4,42,500
Higher of
A) Actual Cost of Acquisition 3,05,000
B) Lower of
 a) Sales Consideration  4,80,000
 b) FMV as on 31.01.2018  4,42,500
LTCG under Section 112A   1,67,500
Less:  1,00,000
Tax on Balance Amount @ 10%   67,500

Suppose, the conditions (mentioned above) of Section 112A are not satisfied, then Capital Gain shall be computed as under:

Computation under Section 112

Full Value of Consideration  6,30,000
Less: Expenses on Transfer  20,000
Net Consideration  6,10,000
Less: Index Cost of Acquisition for Shares Acquiried on 01-04-2019
=200000*282/148
3,81,081
Less: Index Cost of Acquisition for Shares Acquiried on 31-12-2015
=105000*282/240
 1,23,375 5,04,456
LTCG under Section 48 1,05,544

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3 Comments

  1. vikasabhang1999 says:

    Dear Kirti Prakash. Thanks for commenting
    Sales consideration will be 630000 in our example for LTCG under Section 111A.
    which is taken as 480000.
    But in that case also, our Ans for Capital Gain will not change, as FMV as on 31.01.2018 will be lower than Sales Consideration and it will be taken as Cost of Acquisition for our computation of Capital Gain under section 111A.
    Thank you
    Vikas Abhang

  2. KIRTI PRAKASH says:

    I was going through the article titled “Everything about taxation sale of securities.. ” by Vikas Abahng dated 22nd Dec. 2020. In the example of Taxability under section 112A a figure of Rs. 4,80,000 of Sales consideration is not clear. Please make it clear.

  3. KIRTI PRAKASH says:

    I was going the article titled “Everything about taxation on sale of securities ….. by Vikas Abahng dated 22 nd Dec, 2020 where I found that in the example of computation under section 112A, the figure of Rs. 4,80,000/- mentioned against ” Sale consideration ” is not clear . Can you , explain it.

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