Mr. A (resident) has the following incomes:
Under PGBP = 150000.00
STCG on equity shares (liable to STT) = 15000.00
LTCG = 25000.00
Total income = 150000+15000+25000 = 190000
BEL = 160000.00
Calculate the tax payable by him.
Solution: In this question provisions of section 111A and 112 shall be applied. It may have 3 solutions as below:
1.
STCG: tax on such STCG shall be @ 15% u/s 111A
Proviso to section 111A(1) states that where total income - such STCG < BEL, the such STCG shall be reduced by such short fall.
Here 190000 – 15000 = 175000, i.e more than BEL, so proviso to section 111A(1) shall not be applied.
Tax payable on such STCG = 15000 * 15% = 2250
LTCG: tax on such LTCG shall be @ 20% u/s 112
Proviso to section 112(1)(a) states that where total income - such LTCG < BEL, the such LTCG shall be reduced by such short fall.
Here 190000 – 25000 = 165000, i.e more than BEL, so proviso to section 112(1)(a) shall not be applied.
Tax payable on such LTCG = 25000 * 20% = 5000
Note: this solution is according to my understanding to language of act. It seems to wrong to me as tax is charged on Rs.40000 (15000+25000), but his total income exceeds the BEL by only Rs. 30000 (190000-160000).
2.
According to me and keeping in view the intention of law, in such case, the following steps shall be for calculating tax:-
1. calculate the total income of the assessee
2. calculate and aggregate the incomes chargeable at specific rate.
3. If total income – income chargeable at specific rate < BEL, compute such short fall.
4. Divide such short fall proportionately to the various incomes chargeable at specific rates, and deduct them from relating incomes.
Total income = 190000
Aggregate of total incomes chargeable at specific rate = 15000+25000 = 40000
Total income – income chargeable at specific rate = 190000 – 40000 = 150000, which is short by Rs.10000.
Short fall belonging to STCG = 10000 * 15000 / 40000 = 3750
Short fall belonging to LTCG = 10000 * 25000 / 40000 = 6250
Tax on STCG = (15000 – 3750 ) * 15% = 1688.00
Tax on LTCG = (25000 – 6250 ) * 20% = 3750.00
3. Benefit for B.E.L. can be availed for LTCG amounting Rs.10000, then balance LTCG amounting Rs.15000 shall be taxed @ 20%, and whole STCG shall be taxable @ 15%. So total tax = 3000 + 2250 = 5250.00
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