[Section 111A] : Tax on Short-Term Capital Gains in case of Equity Shares and Units of Equity Oriented Fund.

Here we describe all the Provisions towards Calculation of Tax on Short-term Capital Gains under Section 111A in case of Equity Shares and Units of Equity Oriented Fund.

Where the total income of an assessee includes any income chargeable under the head “Capital Gains”, arising from the transfer of a short-term capital asset, being

(i)  an equity share in a company or

(ii)  a unit of an equity oriented fund or units of such fund of funds or

(iii)  a unit of a business trust

and

(a)        the transaction of sale of such equity share or unit is entered into on or after 1.10.2004;

(b)        such transaction is chargeable to securities transaction tax,

the tax payable by the assessee on the total income shall be computed as under:

(i)  on such short-term capital gains 15%; and

(ii)  on the balance amount of the total income special rates or normal as applicable.

However, in the case of an individual or a Hindu undivided family being a resident, where the total income as reduced by such short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-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 short-term capital gains shall be computed at the rate of 15%.

No Deduction under Chapter VIA:

Further, where the gross total income of an assessee includes any short-term capital gains referred to in section 11 1A above, the deduction under Chapter VIA shall be allowed from the gross total income as reduced by such capital gains.

Taxability of ULIP on Sale or Redemption:

The Finance Act, 2021 has included such ULIPs [to which exemption under section 10(10D) does not apply on account of the applicability of the ‘fourth and fifth provisos] in the definition of equity oriented fund in section 112A so as to provide these policies the same treatment as unit of equity oriented fund. Thus provisions of section 111A would also apply on sale / redemption of such ULIPs if there is any short-term capital gain on account of such ULIPs.