Who in this world does not like to earn profits/gains? Everyone does, right! Long Term Capital Gain usually arises if the asset or investment is withheld for longer span of time. Income Tax department has laid down rules and regulations for everything, you gain. In case you an individual/Domestic company/NRI/ any other residents and interested in trading of securities or a LTCG lover. Here is what you should know about Section 112-Tax on Long Term Capital Gains.
Where the total income of an assessee include the gains arising from the sale/transfer of long-term capital asset, which is chargeable to tax, the tax payable on total income for such an assessee shall be the aggregate of (1) and (2) below.
Listed Securities or Zero Coupon Bonds: The capital gains arising from transfer of the long-term capital asset being listed securities (other than a unit) or zero coupon bonds exceed 10% of the amount of capital gains before giving the effect of indexation, such excess beyond 10% shall be ignored for the purpose of computation of tax payable by the assessee. The assessee has the 2 options for computing tax:
The assessee can exercise any option at his own discretion and can opt to switch or change the option in the same previous year. The option can be chosen judiciously comparing the tax liability under both the options. In case of bonus shares, the second option shall be applied by default.
Unit of a Mutual Fund: The capital gains arising from transfer of the long-term capital asset being units of a Mutual Fund specified under clause (23D) of section 10, during the period beginning from 1st April, 2014 to 10th July, 2014 exceed 10% of the amount of capital gains before giving the effect of indexation, such excess beyond 10% shall be ignored for the purpose of computation of tax payable by the assessee.
Deduction under Chapter VI-A: Where the gross total income of an assessee includes any income arising from the transfer of long-term capital asset, the gross total income shall be reduced by the amount of such capital gain and deduction under chapter VI-A shall be allowed as if the reduced gross total income were the gross total income of the assessee.
Rebate under Section 88: Where the total income of an assessee includes any income arising from the transfer of long-term capital asset, the total income shall be reduced by the amount of such capital gain and Rebate under section 88 shall be allowed from the income tax payable on such reduced total income.
Note: However, it should be noted that the shares of the private limited companies does not come under the ambit of securities.
Listed securities means the securities which are listed on any recognised stock exchange in India.
Unlisted securities means the securities which are not listed securities.
Venture Capital Company means a company approved by the Government of India which is engaged in providing finance to the venture capital undertakings mainly by:
Venture capital undertaking means a company which qualifies for the following:
At last but not the least, it can be summarised that the above in-depth guide on section 112 by H&R Block explained the taxation on long term capital gains and its implications on various residential heads and securities. Looking forward to e-file your return with more ease and with the help of experts, H&R Block would love to make your life easy taxing.