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Capital Gain -proviso to Sec. 111A.

Pankaj (Manager) (295 Points)

23 November 2009

Please clarify me regarding Proviso to Sec. 111A

Thanks

Pankaj Sonar

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17 Replies

CA. Megha Topiwala (Job) (1534 Points)
Replied 23 November 2009

Its regarding the short term capital gain on shares and securities on which STT is paid... n transacted through a recognised stock exchange.... such transcations are taxed @ 15% flat rate...

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CA Devanshi Gandhi (Ajani) (FCA DISA Mcom CIFRS & LLB) (9060 Points)
Replied 23 November 2009

deduction US 80 are not available against it......

CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 23 November 2009

sorry megha..... but it didn't mention in any section or rule that it must be traded in recognised stock exchange....... rest everything is correct....... thanks any way....... for sharing.......

MOHIT MAHAJAN (LCS, ACA) (2050 Points)
Replied 23 November 2009

Originally posted by :Megha Shah
"	Its regarding the short term capital gain on shares and securities on which STT is paid... n transacted through a recognised stock exchange.... such transcations are taxed @ 15% flat rate...	"

In my opinion its part of main Section 111A and not its proviso.

The proviso to section 111A is as follow:-

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 15 per cent.

I will try to explain the proviso by an example

Q-: Salary income - 1,50,000 Other source income - 20000

STCG 20,000 Deduction allowed under 80C - 10,000

Solution-: Gross Total income without STCG - 1,70,000

Less Deduction u/s 80 C 10,000

Total Income 1,60,000

Plz. note that a resident individual is eligible for exemption upto 1,50,000. In above example the Total Income as reduced by STCG is 1,40,000 which is below 1,50,000. Now here the proviso will come into effect.

Proviso says that if income as reduced by such STCG is below the maximum amount not chargeable to tax Then such STCG shall be reduced by amount by which total income so reduced falls short of the exempted amount (1,50,000 - {1,60,000 - 20,000) and tax on balance STCG shall be computed at 15%

Thus in above example

10,000 will be taken away from STCG and will be added to Total Income so that assessee can take full benefit of exemption (1,40,000+10,000 = 1,50,000) and balance STCG ( 20,000 - 10,000) = 10,000 shall be taxable @ 15% if conditions of 111A as given in the qbove quote of Megha are fulfilled.

(Plz. correct me if there is any mistake in the concept stated by me.)

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MOHIT MAHAJAN (LCS, ACA) (2050 Points)
Replied 23 November 2009

Sorry, i miscalculated the example, now i have modified it.

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Sandeep Pandey (CA FINAL) (1306 Points)
Replied 24 November 2009

Its 15% tax ........................

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 24 November 2009

Thanks Mr Mohit

The Harshit Aggarwal (B.Com(H) ,CS Final) (5278 Points)
Replied 24 November 2009

Originally posted by :sivaram
"	Thanks Mr Mohit	"

Juzer Sadikot (CA - innovative solutions for Imports and Exports) (1309 Points)
Replied 24 November 2009

Mr. Mohit,

I think rate of Tax shall be 10% in the given example, refer my post /forum/message_display.asp?group_id=49201

Thanks and Regards

Juzer

bhavya .ch (student of ca) (28 Points)
Replied 24 November 2009

thanks for your updates, its very useful for making computations

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Farzad (CA Final) (24 Points)
Replied 24 November 2009

thanks for the post

MOHIT MAHAJAN (LCS, ACA) (2050 Points)
Replied 24 November 2009

Yes Juzer, in the site the rate is10% with * and expression "15 need be substituted for ten" However generally proviso should be read in harmony with the main section. Even department have expressed the same desire by givng the quote. Hence you sould take the rate as 15% in accordance with the rate of main section.

Intention of insertion of proviso is to give relief to resident assessee in case his income dont qualify for basic exemption and not to give him relief in rate of tax.

Narayanan.R (Chartered Accountant) (191 Points)
Replied 24 November 2009

Originally posted by :MOHIT MAHAJAN
"	Sorry, i miscalculated the example, now i have modified it.	"

Thanks buddy

Juzer Sadikot (CA - innovative solutions for Imports and Exports) (1309 Points)
Replied 24 November 2009

Originally posted by :MOHIT MAHAJAN
"	Yes Juzer, in the site the rate is10% with * and expression "15 need be substituted for ten" However generally proviso should be read in harmony with the main section. Even department have expressed the same desire by givng the quote. Hence you sould take the rate as 15% in accordance with the rate of main section. Intention of insertion of proviso is to give relief to resident assessee in case his income dont qualify for basic exemption and not to give him relief in rate of tax.	"

Dear Mohit,

Appricited your response but would like to say following;

1) The text which you have refered are copyright property of Taxmann,

2) Department has not maintained such contents/comment, its the Taxmann who has given such comment.

3) For Income Tax, intention is not to base to conclude. In other word, Income Tax is not law like FEMA/IPC as to one has to understand the spirit of the law and act accordingly. For Income Tax, what ever is written is to be interpreted is to be followed.

4) For sake of conservation, one may take rate of 15%. But I still doubt about consequencies if one take it 10%.

Regards

Juzer