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Tax liability in case of long term capital gain (ltcg)

C A Jitendra Phophaliya (Service) (46 Points)

15 March 2012

Hi,

My client is having Long Term Capital Gain income of Rs. 14 Lac. I want to know all the amount after basic exemption limit and deduction u/s 80C will be taxable at flat rate 20% or we can calculate tax liability as per normal slab rate.

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12 Replies

Sonam Bidasaria (CA) (770 Points)
Replied 15 March 2012

Plz provide the various component of gross total income of your client.

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 15 March 2012

If your client is an individual, the tax payable wud be as follows:

If the GTI includes LTCG, then the LTCG shud be reduced from the GTI and on the balance tax wud be payable at the normal applicable rates. Also 20% tax wud be payable on the LTCG.

However after reducing the LTCG, the GTI is below the maximum limit not chargeable to tax after availing the deduction u/s 80C and other sections , then the LTCG wud get reduced by the difference between the Basic Exemption limit & the amount which falls short of Basic exemption limit and on the balance LTCG tax wud be payable @ 20%. For instance, if your GTI is 300000 which includes LTCG of 200000, then the income other than LTCG falls short of Rs80000 of the basic exemption limit. Hence 80000 would be reduced from Rs.200000 and on the balance LTCG of 120000 tax wud be payable.

In your case you have given the income only relating to LTCG and not any other income. So if this is the case then tax wud be payable on whole of Rs.14lacs

ca binny (auditor) (117 Points)
Replied 15 March 2012

sir, i hav a question that if there is no other income then can the entire exemption limit be not used and LTCG tax would be payable only on Rs. 1220000?

C A Jitendra Phophaliya (Service) (46 Points)
Replied 15 March 2012

Client is having only LTCG on sale of land

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 15 March 2012

then the whole of the LTCG would be taxable @ 20%. Please refer section 112 of the I-T Act.

If there is only LTCG 7 no other income then whole of teh LTCG wud be taxable @ 20%.

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C A Jitendra Phophaliya (Service) (46 Points)
Replied 15 March 2012

But my client can utilise basic exemption and 80C limit or not.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 15 March 2012

No he cannot. only if there is income other than LTCG then only he can utilize the basic exemption limit. Deductions under Chapter Vi-A is not available in case of LTCG. hence no ded for 80C is available for your client

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Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 15 March 2012

Agree with Giridhar...

C A Jitendra Phophaliya (Service) (46 Points)
Replied 15 March 2012

But I think Proviso of sec 112(1)(a) and sec 112(2) is showing that both can be claimed. Any one can confirm after going through these sections.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 15 March 2012

the provision is as under:

Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-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 long-term capital gains shall be computed at the rate of twenty per cent ;

the above can be done only if the gross total income includes income other than LTCG also. if not then the proviso is not applicable. In your clients case there is only LTCG & no other income, so tax on the whole amount of LTCg would be requried to be paid.

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C A Jitendra Phophaliya (Service) (46 Points)
Replied 15 March 2012

If client is having interet income in saving account then what will happen?

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 15 March 2012

In that case he will get the deduction of the difference between the basic exemption limit and the amount whihc falls short of the basic exemption limit. from the LTCG & on the balance he will will have to pay tax @ 20%.