Amended and updated notes on section 111A of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to tax on short-term capital gains in certain cases.
Chapter XII (Sections 110 to 115BBG) of the Income Tax Act 1961 deals with the provisions related to determination of tax in certain special cases. Section 111A of IT Act 1961-2023 provides for tax on short-term capital gains in certain cases.
Recently, we have discussed in detail section 111 (Tax on accumulated balance of recognised provident fund) of IT Act 1961. Today, we learn the provisions of section 111A of Income-tax Act 1961. The amended provision of section 111A is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 111A of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-111A: Tax on short-term capital gains in certain cases
Section 111A(1) of Income Tax Act
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 an equity share in a company or a unit of an equity oriented fund or a unit of a business trust and—
- (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and
- (b) such transaction is chargeable to securities transaction tax under that Chapter,
the tax payable by the assessee on the total income shall be the aggregate of—
- (i) the amount of income-tax calculated on such short-term capital gains at the rate of fifteen per cent; and
- (ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:
Provided that 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 fifteen per cent:
Provided further that nothing contained in clause (b) shall apply to a transaction undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency.
Section 111A(2) of Income Tax Act
Where the gross total income of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.
Section 111A(3) of Income Tax Act
Where the total income of an assessee includes any short-term capital gains referred to in sub-section (1), the rebate under section 88 shall be allowed from the income-tax on the total income as reduced by such capital gains.
Explanation: For the purposes of this section,—
(a) “equity oriented fund” shall have the meaning assigned to it in clause (a) of the Explanation to section 112A;
(b) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(c) “recognised stock exchange” shall have the meaning assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43.