Section 112A of Income-tax Act 1961 : Tax on long-term capital gains in certain cases.

By | April 1, 2018
(Last Updated On: October 4, 2018)

Section 112A of Income-tax Act 1961 – FA, 2018

Tax on interest on National Savings Certificates (First Issue).

112A. [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989. Original section 112A was inserted by the Finance (No. 2) Act, 1965, w.e.f. 11-9-1965 and later on amended by the Finance Act, 1966, w.e.f. 1-4-1966, Finance (No. 2) Act, 1967, w.e.f. 1-4-1968, Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1968/1969 and Finance Act, 1973, w.r.e.f. 1-4-1972.]

Following section 112A shall be inserted after section 112 by the Finance Act, 2018, w.e.f. 1-4-2019 :

Tax on long-term capital gains in certain cases.

112A. (1) Notwithstanding anything contained in section 112, the tax payable by an assessee on his total income shall be determined in accordance with the provisions of sub-section (2), if—

(i)the total income includes any income chargeable under the head “Capital gains”;
(ii)the capital gains arise 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;
(iii)securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004) has,—
(a)in a case where the long-term capital asset is in the nature of an equity share in a company, been paid on acquisition and transfer of such capital asset; or [ Refer Sec. 112A relief by CBDT : Notification No 60/2018 Dated 01.10.2018  ]
(b)in a case where the long-term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, been paid on transfer of such capital asset.

(2) The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of—

(i)the amount of income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per cent; and
(ii)the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains referred to in sub-section (1) as if the total income so reduced were the total income of the assessee:

Provided 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, the long-term capital gains, for the purposes of clause (i), 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.

(3) The condition specified in clause (iii) of sub-section (1) shall not apply to a transfer undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transfer is received or receivable in foreign currency.

(4) The Central Government may, by notification in the Official Gazette, specify the nature of acquisition in respect of which the provisions of sub-clause (a) of clause (iii) of sub-section (1) shall not apply.[ Refer Sec. 112A relief by CBDT : Notification No 60/2018 Dated 01.10.2018  ]

(5) 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.

(6) Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), 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.

Explanation.—For the purposes of this section,—

(a)“equity oriented fund” means a fund set up under a scheme of a mutual fund specified under clause (23D) of section 10 and,—
(i)in a case where the fund invests in the units of another fund which is traded on a recognised stock exchange,—
(A)a minimum of ninety per cent of the total proceeds of such fund is invested in the units of such other fund; and
(B)such other fund also invests a minimum of ninety per cent of its total proceeds in the equity shares of domestic companies listed on a recognised stock exchange; and
(ii)in any other case, a minimum of sixty-five per cent of the total proceeds of such fund is invested in the equity shares of domestic companies listed on a recognised stock exchange:
Provided that the percentage of equity shareholding or unit held in respect of the fund, as the case may be, shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;
(b)“International Financial Services Centre” shall have the meaning assigned to it in clause (q) of section 227a of the Special Economic Zones Act, 2005 (28 of 2005);
(c)“recognised stock exchange” shall have the meaning assigned to it in clause (ii) of Explanation 1 to clause (5) of section 43.
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