Query in respect of Sec 111A of short term capital gain

Final 4189 views 7 replies

CA Umashankar Vaishnav

Service in Cement Manufacturing Organiza

1069 Points Joined September 2007

Query in respect of Sec 111A of short term capital gain of income tax Act, 1961.

Query : Suppose an individual (resident) have the following income for the Assessment Year 2010-11.

A) Short term Capital Gain u/s 111A = 245000.00

B) Business Income = 240000.00

C) Chapter VI A Deductions = 100000.00

Now, my question is how to calculate tax liability in that case.

Answer: Alternative 1

A) Short term Capital Gain u/s 111A = 245000.00

B) Business Income = Rs.240000.00

Gross total income =Rs.485000.00

Less: Chapter VI A = Rs.100000.00

Net Income = 385000.00

Tax Liability * = 23175.00(as per Vinod K. singhania sir CA Final Book)

Tax Liability * = 34762.50(as per Vinod Gupta sir CA Final Book)

Since taxable income minus short term capital gain is less than exemption limit than relief being calculated as

Relief = Exemption limit –( Net income – Short term capital Gain )

Relief = 160000.00 – ( 385000.00 – 245000.00)

Relief = 20000.00

Now, Short Term Capital Gain Charable to tax = 245000.00 – 20000.00 = 225000.00

Tax rate only in that particular Relief case is 10%(+EC+SHEC) instead of 15% (+EC+SHEC), in any other case

where Relief case are not applicable than we use 15% (+EC+SHEC) as specified in Vinod Kumar Singhania

sir CA Final Book applicable for the Assessment Year 2010-2011.

*Therefore, Tax liability = 10.30% of 225000.00 = 23175.00

Alternative 2

All solution remain same but difference arises only in case of determining Tax Liability in that particular case

Tax rate in that particular Relief case or in any other case of Sec. 111A is 15%(+EC+SHEC) as specified in Vinod Gupta sir CA Final Book applicable for the Assessment Year 2010-2011.

There is no concept of 10%(+EC+SHEC) In Vinod gupta sir Module of Capital Gain.

*Therefore, Tax liability = 15.45 % of 225000.00 = 34762.50

So, I want to know the real concept and rule in this particular section please help me.

Replies (7)

Saurabh Toshniwal

ca final

2363 Points Joined July 2010

short term capital gain u/s 111A is taxable @ 15% not @ 10%

vinod gupta sir is correct

u can also refer module newly issued by institute

Sunshine

Helping All

10575 Points Joined March 2010

yes...its taxable at 15%...........

Max Payne

employed

2574 Points Joined May 2008

Hi, the better view is to tax it at 15%

But as V K Singhania has said, the first proviso to section 111A reads "Ten per cent." The rate change in the proviso was left out by the finance bill of 2008.

But its been marked with (*) in the act, and the footnote says that the words "ten" need be substituted by "fifteen" - Now that does not have legislative approval!

khushboo

article

86 Points Joined September 2010

yeh toh ipcc mae bhe hae concept its 15%

$rik@nth

student

222 Points Joined January 2008

during the amendment in finance act a printing mistake arised

actually the intention of the act is to tax stcg u/s 111A @ 15%

but while amending the act in proviso to the sec 111A, it is not changed and remained as 10%

that's why v.k.singhania wrote like that

but if you refer any other author book including institute material, it will appear as 15%

even now if you refer income tax act and ready reckoner of same publishers say tax pub,

in act, in proviso to the section it will be 10%, but in ready reckoner it will be 15%

so, it is only 15% but not 10%

CA Ghanshyam Joshi

CA Dip IFR (ACCA UK)

3229 Points Joined June 2009

The section is as follows -

⁵⁹[Tax on short-term capital gains in certain cases.

111A. (1) Where the total income of an assessee includes any income chargeable under the head “Capital gains”, arising from the transfer of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund and—

(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and

(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 aggregate of—

(i) the amount of income-tax calculated on such short-term capital gains at the rate of ⁶⁰[fifteen] per cent; and

(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount 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 short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-term capital gains 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 and the tax on the balance of such short-term capital gains shall be computed at the rate of ten* per cent.

(2) Where the gross total income of an assessee includes any short 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.

(3) Where the total income of an assessee includes any short-term capital gains referred to in sub-section (1), the rebate under section 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, the expression “equity oriented fund” shall have the meaning assigned to it in the Explanation to clause (38) of section 10.]

*Word “fifteen” need be substituted for “ten”.

In the amendement it had given that the rate of tax for Sec 111A has been chenged from 10% to 15%. Hence 15% will prevail.

in the current case the tax is to be calculated on short term capital gain as reduced by the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate of 15 per cent.

CA Ghanshyam Joshi

CA Dip IFR (ACCA UK)

3229 Points Joined June 2009

extract from new study material of ICAI -

(iii) The proviso to this section provides that in the case of resident individuals or HUF, if the basic exemption is not fully exhausted by any other income, then the short-term capital gain will be reduced by the unexhausted basic exemption limit and only the balance would be taxed at 15%. However, the benefit of availing the basic exemption limit is not available in the case of non-residents.

(iv) Deductions under Chapter VI-A cannot be availed in respect of such short-term capital gains on equity shares of a company or units of an equity oriented mutual fund included in the total income of the assessee.