Doubt in a provision

As per Section 112 of the Income-tax Act, 1961, the special tax rate of 12.5% or 20% applies to individuals and HUFs who are residents in India.

Resident Status: To be eligible for this special tax rate, the individual or HUF must be a resident in India as per Section 6 of the Income-tax Act, 1961. This means they must meet the residency criteria, which includes:

1. *Physical presence*: Being physically present in India for at least 182 days in the financial year.

2. *Intent to reside*: Having an intent to reside in India. Non-Resident Status: If the individual or HUF is a non-resident, the special tax rate under Section 112 will not apply. Instead, the tax rates applicable to non-residents will apply.

 Key Points: 1. *Resident status*: The individual or HUF must be a resident in India to be eligible for the special tax rate.

2. *Special tax rate*: The special tax rate of 12.5% or 20% applies to long-term capital gains from the transfer of land or building acquired before July 23, 2004, and sold on or after July 23, 2004.

Sec 112 proviso on land or building:

• For resident individuals and HUFs transferring land or building acquired before 23 July 2024 (transfer on or after that date), tax is the lower of: 12.5% without indexation, or 20% with indexation (computed under the old rules). Other taxpayers (companies, firms, non-residents) pay 12.5% without indexation.

The section 112 relief is not restricted to resident individuals or HUFs. The proviso covers a “resident individual or a resident HUF”; therefore, non-residents do not qualify for the 20% indexed-tax comparison and are generally subject to the 12.5% rate without indexation, subject to applicable treaty and other provisions.

For a qualifying resident individual/HUF, the comparison applies to long-term land or building acquired before 23 July 2024 and transferred on or after that date. The tax payable is capped at the amount computed under the earlier 20%-with-indexation method; it is not an unrestricted choice of whichever calculation produces the lower amount.

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