LTCG on ELSS Mutual Funds from 2019-20 A.Y.

Dear Ranjan

Please note that not all Mutual Funds are covered u/s 112A. Only Equity Oriented Mutual Fund as defined under that section is covered and is taxed @ the concessional rate of 10%. LTCG arising from the transfer(sale) of any other mutual fund unit be taxed @ 20% u/s 112.

1. As per the example given by you, you will have to include LTCG of MF Rs.90,000/- to compute your gross total income and then, net income taxable. This is because the benefit of Rs.1,00,000/- is given in Sec.112A (which operates at the tax computataion stage) and is not given as an exemption. In fact, the exemption earlier available to such income u/s 10(38) stands withdrawn. So the effect is that your gross income increases to the tune of LTCG earlier so exempted u/s 10(38).

Thus, to keep it simple, just understand that Rs.90,000/- will indeed form part of your gross total income and net income.

2. Once you determine your net income, next step is computation of income tax payable. Sec.112A operates at this step. So, while computing the tax paybale, you can ignore Rs.90,000 being less than Rs.1,00,000/- and compute tax on your salary.

3. Also, you can avail benefit of unused exemption limit as per proviso to Sec.112A(2) assuming you are a resident individual.

Regards

Ajay

Dear Ranjan

I think we will have to wait till next Assessment Year to see how it will be presented in the ITR released by Income Tax Dept. I assume, first you will have to present full LTCG (that is, beofer Rs.1 Lakh deduction) under Capital Gains and thereafter, the tax computation will take place automatically in the ITR preparation utility after giving deduction of Rs.1 Lakh as allowed by Sec.112A. 

Yes, for all other computational purposes, Rs.90,000 will form part of your Gross Total Income. The reason why I said so is that, for Sec.112A to get operational, the conditions laid itself says that your "total income" includes LTCG from Equity Orineted Mutuals. Only at the next level of tax computation, Rs.1 Lakh gets deducted. 

Anyway, you may wait for more insights from other members.

Regards

Ajay