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 flat@ 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 |
Author Bio
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
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.
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.