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Capital gains on share sale

sfunds.2014 (retired) (100 Points)

07 November 2021

1)I have sold reliance shares and i had capital gain after taking into account price on 30 jan 2018.

capital gain is around Rs 220000

But capital tax gain upto one lakh per annum is allowed how to claim this under ITR

(under which section claim has to be made for 100000

2) I also sold rights issue (shares purchased in 1990)of reliance for 25000

is this LTCG or STCG

Thanks

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8 Replies

CA Aakarsh Jain (CA) (10431 Points)
Replied 07 November 2021

1) Rs 100000 is exempted from 220000 u/s 112A and difference of 120000 is taxable as LTCG.

2) This is Long Term Capital Gain.

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Rammohan (NA) (255 Points)
Replied 07 November 2021

When you enter details of shares sold (resulting in LTCG Rs 2,20,000/-) in Schedule 112A, the system automatically deducts the exemption of Rs 1,00,000/- and takes the balance of Rs 1,20,000/- as taxable LTCG. There is no need to separately claim the basic exemption of LTCG of Rs 1,00,000/-.

As for the second question, it seems that the rights shares are your entitlement on shares held earlier. In my view, the sale proceeds of these rights shares entitlement are neither LTCG or STCG, and have to be reported in Other Sources income, item 1e of form ITR 2. However, experts on this Forum may give their opinion in this matter. Thanks.

sfunds.2014 (retired) (100 Points)
Replied 08 November 2021

When I saw calculation in My ITR2 it shows 220000 as taxable income

Can I make change

ie deduct 100000

or is 100000 deduction available for only capital gains for sale of shares without indexation on 31 jan 2018

please reply

Rammohan (NA) (255 Points)
Replied 08 November 2021

Assumed that your LTCG of Rs 2,20,000/- is in respect of shares held by you on or before 31.1.2018, that security transaction tax was paid on their sale, and therefore this amount is eligible for an exemption of Rs 1,00,000/- from LTCG.

If you have entered the figure of Rs 2,20,000/- in Schedule 112A, then you would find that in Schedule SI, the last column against item 5 (2A) {for Sch 112A}, would show the tax payable on this would be Rs 12,000/- and not Rs 22,000/-. In Sch TTI also, against item 2b, the tax on LTCG of Rs 2,20,000/- would appear as Rs 12,000/-.

sabyasachi mukherjee (27595 Points)
Replied 08 November 2021

1) It's exempted under Sec 112AA long term Capital gain ,the itr specifically shows it.Exempted to the extent of Rs.1 lakh. Taxable in excess of Rs.1 lakh.New section 112AA INTRODUCED W.E.F.
2) It's 0

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Rammohan (NA) (255 Points)
Replied 08 November 2021

Mr Sabyasachi Mukherjee

I request you to provide the text of Section 112AA of the Income-Tax Act, for information and better clarity in the matter. Thank you.

The instructions for filling out Form ITR- 2 - Income-Tax, under "Schedule CG - Capital Gains, item b', state:

'..... tax shall be charged at a flat rate of 10% in Schedule SI on the aggregate LTCG , as reduced by Rupees One Lakh, for the purpose of tax computation after giving benefit of Rs 1 Lakh each u/s 112A and 115AD(1)(b)(iii). This benefit of Rs 1 lakh will be given in Schedule SI'.

sabyasachi mukherjee (27595 Points)
Replied 08 November 2021

Mr. Rammohan

how can can you comment on query no. 2 when the question does not specify in detail the date of acquisition and date of sale.
Now let's come to the wordings of Sec 112A
Conditions to be satisfied for applicability of Sec 112A (1)
NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 112 THE TAX PAYABLE BY AN ASSESSE ON HIS TOTAL INCOME SHALL BE DETERMINED IN ACCORDANCE WITH PROVISIONS OF SEC 112C (A) 2 IF THE FOLLOWING CONDITIONS ARE SATISFIED:
1. STT TAX HAS BEEN PAID AS UNDER
2.TAX PAYABLE ON TOTAL INCOME IF IT INCLUDES LONG TERM CAPITAL GAIN
3. CONDITION OF PAYMENT OF STT NOT APPLICABLE IN CASE OF TRANSACTIONS on a recognised stock exchange located in any international financial services centre.
4. deduction under chapter vi ( sec 80 c to 80 u not applicable
5. rebate of tax under section 87A not to be allowed from the tax payable on such long term capital gains ( section 112A(6))
CONSEQUENTIAL AMMENDMENTS:
The first and second section to section 48 not applicable for the purpose of computing capital gain.

Rammohan (NA) (255 Points)
Replied 08 November 2021

1. Question no. 1 was about claiming the basic exemption of Rs 1 lac on LTCG on the ITR. So the questioner was clear that there was an LTCG on the shares sold and that these shares were purchased by him on or before 31.1.2018.

2. Question no. 2 reads: "I also sold rights issue (shares purchased in 1990) of reliance for 25000 is this LTCG or STCG". This indicates that this was a separate transaction of Rs 25,000/- in addition to Rs 2,20,000/- mentioned in question 1. Hence the interpretation is that the questioner is referring to the Reliance Rights Shares entitlement which he has sold in addition to the shares referred to in question 1.

That is why my answer: "In my view, the sale proceeds of these rights shares entitlement are neither LTCG nor STCG.... " clearly indicates that the answer relates to the rights entitlement, not to shares held. My interpretation could be wrong and so I requested experts to give their opinion.

Maybe the questioner could please clarify his second question - whether he sold more shares (i.e. in addition to those mentioned in his question 1), or whether he sold the rights entitlement he was eligible to (on the shares he had purchased in 1990), in addition to those mentioned in his question 1..

3. Since Sec 112AA was not available to me, I requested for the text of this Section.

Thank you.