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capital gain

Sahil Kansal (27 Points)

15 September 2017

when the case of 10 % tax in case capital gain

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177741 Points)
Replied 16 September 2017

Generally, long-term capital gains are charged to tax @ 20% (plus surcharge and cess as applicable), but in certain special cases, the gain may be (at the option of the taxpayer) charged to tax @ 10% (plus surcharge and cess as applicable). The benefit of charging long-term capital gain @ 10% is available only in respect of long-term capital gains arising on transfer of any of the following asset:

(a) Any security (*) which is listed in a recognised stock exchange in India;

(b) Any unit of UTI or mutual fund (whether listed or not) ($); and

(*) Securities for this purpose means “securities” as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956. This definition generally includes shares, scrips, stocks, bonds, debentures, debenture stocks or other marketable securities of a like nature in or of any incorporated company or other body corporate, Government securities, such other instruments as may be declared by the Central Government to be securities and rights or interest in securities.

($) This option is available only in respect of units sold on or before 10-7-2014.

In other words, in case of long term capital gain arising on account of aforesaid assets, the taxpayer has following two options:

a. Avail of the benefit of indexation; the capital gains so computed will be charged to tax at normal rate of 20% (plus surcharge and cess as applicable).

b. Do not avail of the benefit of indexation; the capital gain so computed is charged to tax @ 10% (plus surcharge and cess as applicable). The selection of the option is to be done by computing the tax liability under both the options, and the option with lower tax liability is to be selected.