Section 111A-Tax on Short-term Capital Gains

Section 111A

Section 111A of the income tax act covers provisions relating to the tax on short-term capital gains in some instances.

Section 111A-Tax on Short-term Capital Gains in Certain Cases

Section 111A

As per section 111A,

1. Where the aggregate income of an assessee comprises any income chargeable under the head “Capital Gains”; resulting from the transfer of the short-term capital asset, being an equity share in the company or a unit of a business trust or a unit of an equity oriented fund &;
a) the transaction of sale of such equity share or unit is entered into after or on the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; &
b) such transaction is chargeable to securities transaction tax under that Chapter,
the tax payable by the assessee on the total income shall be the sum of;
i) the amount of income-tax calculated on such short-term capital gains at the rate of 15%; &
ii) the amount of income-tax payable on the balance sum of the total income as if such balance amount were the aggregate income of the assessee.

However, in a case of a resident individual or a resident HUF, where the total income as decreased by such short-term capital gains is beneath the maximum amount which is not chargeable to income-tax, then, such STCG (short-term capital gains) shall be decreased by the amount by which the total income as so reduced falls small of the maximum amount which is not chargeable to income-tax, & the tax on the balance of such STCG (short-term capital gains) shall be calculated at the rate of 15%.

Note: Nothing contained in clause (b) above shall apply to a transaction undertaken on a recognized stock exchange established in any International Financial Services Centre & where the consideration for such transaction is payable or paid in foreign currency.

2. Where the total gross income of an assessee comprises any short-term capital gains; referred to in sub-section (1) above, the deduction under Chapter VI-A shall be allowed from the total gross income; as decreased by such capital gains.

3. Where the total income of an assessee contains any short-term capital gains; mentioned in sub-section (1), the rebate U/S 88 shall be allowed from the income-tax on the total income; as reduced by such capital gains.

Explanation: For the purposes of this section;

  • “Equity Oriented Fund” shall have the meaning specified to it in the Explanation to clause (38) of section 10.
  • “International Financial Services Centre” shall have the meaning; specified to it in section 2 clause (q) of the Special Economic Zones Act, 2005 (28 of 2005).
  • “Recognized Stock Exchange” shall have the meaning; assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43.

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