Section 112A of Income Tax Act for AY 2023-24

Section 112A of Income Tax Act 1961 amended by Finance Act 2022 and Income-tax Rules, 1962. Tax on long-term capital gains in certain cases.

Amended and updated notes on section 112A 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 long-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 112A of IT Act 1961-2023 provides for tax on long-term capital gains in certain cases.

Recently, we have discussed in detail section 112 (Tax on long-term capital gains) of IT Act 1961. Today, we learn the provisions of section 112A of Income-tax Act 1961. The amended provision of section 112A 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 112A 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-112A: Tax on long-term capital gains in certain cases

Section 112A(1) of Income Tax Act

Notwithstanding anything contained in section 112, the tax payable by an assessee on his total income shall be determined in accordance with the provisions of sub-section (2), if—

(i) the total income includes any income chargeable under the head “Capital gains”;

(ii) the capital gains arise from the transfer of a long-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;

(iii) securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004) has,—

  • (a) in a case where the long-term capital asset is in the nature of an equity share in a company, been paid on acquisition and transfer of such capital asset; or
  • (b) in a case where the long-term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, been paid on transfer of such capital asset.

Section 112A(2) of Income Tax Act

The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of—

  • (i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per cent; and
  • (ii) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains referred to in sub-section (1) as if the total income so reduced 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 long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, the long-term capital gains, for the purposes of clause (i), 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.

Section 112A(3) of Income Tax Act

The condition specified in clause (iii) of sub-section (1) shall not apply to a transfer undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transfer is received or receivable in foreign currency.

Section 112A(4) of Income Tax Act

The Central Government may, by notification in the Official Gazette, specify the nature of acquisition in respect of which the provisions of sub-clause (a) of clause (iii) of sub-section (1) shall not apply.

Section 112A(5) of Income Tax Act

Where the gross total income of an assessee includes any long-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 112A(6) of Income Tax Act

Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.

Explanation: For the purposes of this section,—

(a) “equity oriented fund” means a fund set up under a scheme of a mutual fund specified under clause (23D) of section 10 or under a scheme of an insurance company comprising unit linked insurance policies to which exemption under clause (10D) of the said section does not apply on account of the applicability of the fourth and fifth proviso thereof and,—

  • (i) in a case where the fund invests in the units of another fund which is traded on a recognised stock exchange,—
    • (A) a minimum of ninety per cent of the total proceeds of such fund is invested in the units of such other fund; and
    • (B) such other fund also invests a minimum of ninety per cent of its total proceeds in the equity shares of domestic companies listed on a recognised stock exchange; and
  • (ii) in any other case, a minimum of sixty-five per cent of the total proceeds of such fund is invested in the equity shares of domestic companies listed on a recognised stock exchange:

Provided that the percentage of equity shareholding or unit held in respect of the fund, as the case may be, shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;

[Clause(a) of explanation of section 112A has been amended (inserted) w.e.f. 01.04.2021 by the Finance Act, 2021]

(b) “International Financial Services Centre” shall have the meaning 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 Explanation 1 to clause (5) of section 43.


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