Section 112A was introduced in 2018 to tax long term capital gains (LTCG) from sale of equity shares and equity mutual funds at 10% for gains exceeding Rs. 100,000. Previously, section 10(38) provided full exemption for such LTCG. Section 112A applies to all assesses including FII investors and NRIs for transactions on or after April 1, 2019. The cost of acquisition is the higher of actual cost or the fair market value on January 31, 2018. Indexation benefit is not available under section 112A.

1. BY :NIHARIKA GARG
CRO0523170

2.  Sec 112A was introduced by
then Finance Minister Shri
Arun Jaitley via Finance
Act,2018.
 Earlier sec 10(38) provided
relief to the investors from long
term capital gain on sale of
equity shares and equity
oriented mutual funds
provided the conditions of sec
are fulfilled

3. • Sec111A deals
with short term
capital gain.
SHORT
TERM
CAPITAL
GAIN
• Sec112 and
Sec112A deals
with LTCG
LONG
TERM
CAPITAL
GAIN

4. Significant erosion in the tax
base resulting in revenue loss.
Abusive use of tax arbitrage
opportunities
Biased against manufacturing
and has encouraged diversion
investment in financial assets.

5. Applicable to all
assesses including
FII investors and
NR.
Applicable from A/Y
2019-20
Applicable on
Equity shares ,units
of equity oriented
fund and units of
business trust.
The benefit of
indexation is not
available where sec
112A applies.

6. Total income
should include
income chargeable
u/h CG
CG should arises
from the tr. Of
long term asset.
In case of equity
share: STT should
be paid both on
acq. and sale.
In case of units-
STT has been paid
on tr. only

7. Computation of capital gain:-
Sales consideration ***
Less: cost of acq ***
sec 55(2)(ac)
Less: expenses of ***
transfer
capital gain ***

8. Section: 55(2)(ac) COSTOF ACQUISITIONIN CASE ASSETIS
ACQUIREDBEFORE 01.02.2018
HIGHER OF (a) and (b) below:
(a)Cost of acquisition of the asset; and
(b)Lower of:
(i) the fair market value(FMV) of the asset; and
(ii) sales consideration

9. Assesse: MR.X acquired equity shares on
01.01.1999 of ABC ltd. for Rs.10,00,000
FMV of theses shares as on 01.04.2001 is
Rs. 11,00,000 and FMV on 31.03.2018
is Rs.20,00,000.
Mr.X sold these shares on 10.04.2018 for Rs.
25,00,000.

10. computation of capital gain and tax u/s 112A
Period of holding: 01.01.1999-09.04.2018 Tax:-
Sales price: 25,00,000 Rs.1,00,000-NIL
Less: COA 20,00,000 Rs.4,00,000-40,000
Capital Gain: 5,00,000
WN:- computation of COA u/s 55(2)(ac)
Higher of:
(i) COA 11,00,000
(ii)Lower of
(A) FMV of asset 20,00,000
(b) sale price 25,00,000

11. SITUATION FMV
Shares/unit listed on a recognized
stock exchange as on 31.01.2018:
(a) Asset quoted on that date
(b) Where there is no trading on
31.01.2018
Highest price quoted on 31.01.2018.
Highest price of the asset on the stock
exchange on a date immediately
preceding 31.01.2018
Unlisted unit NAV of the unit as on 31.01.2018
Unlisted equity share COA*CII for FY 17-18/CII for the
first year in which asset is sold

12. Sec 112A is
applicable if
capital asset is
sold on or
after
01.04.2018.
If capital asset is
sold on or after
01.02.2018 but
upto 31.03.2018,
then exemption
under Sec 10(38)
shall be available
Exemptions u/s
54EE and 54F
shall be
available in
respect of
LTCG referred
to in sec 112A
Computation of
tax:-
(i) Upto
Rs.100000
NIL
(II) Exceeding
Rs.100000
10%

13. SECTION SUMMARY
Sec 112A- Tax on LTCG in
case of equity shares/units of
EOF or units of BT
Tax rate @ 10%
exceeding 1,00,000.
Sec 112- Tax on LTCG 20%
Sec 111A- Tax on STCG 15%