Tax on short term Capital Gains under section 111A and availability of deduction under chapter VIA

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1 Tax on short term Capital Gains under section 111A and availability of deduction under chapter VIA Any income arising from the transfer of short term Capital Assets in the form of equity shares or units of mutual fund where security transaction tax has been paid, such income shall be 15% u/s. 111A (1)(i). The balance income shall be taxed at normal rate of tax. If above short term Capital Gain is below the maximum amount not chargeable to tax in that case such short term Capital Gain shall be reduced by the amount of shortfall - Provisio 1 to section 111A. No deduction under chapter VIA shall be allowed on such short term Capital Gain. Section 111A(2). 1

The balance income shall be taxed at normal rate of tax.

2 Tax on long Term Capital Gains u/s. 112 and availability of deduction under chapter VI A In case the income of the assessee includes Long Term Capital Gains, then the tax payable by the assessee shall be aggregate of: 20% of long term Capital Gains which is included in the total income. The balance amount of tax shall be calculated after reducing from the total income the Long Term Capital Gains. 2

Long Term Capital Gains, then the tax payable by the assessee shall be aggregate of: 20% of long

3 Tax on long Term Capital Gains u/s. 112 and availability of deduction under chapter VI A If the Total income as reduced by such Long Term Capital Gains is below the maximum amount not chargeable to tax, in that case, such long term Capital Gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount not chargeable to tax and the balance of such long term shall be computed to tax at the rate of 20%. 3

Gains is below the maximum amount not chargeable to tax, in that case, such long term Capital Gains shall be

4 Long Term Capital Gains on transfer of Equity shares/ units on payment of security transaction tax Section 10(38) Long term Capital Gain on transfer of equity shares or units of equity oriented mutual fund is exempt u/s.10(38). The above long term Capital Gains must be covered under payment of security transaction tax. This is applicable from assessment year The shares must be transferred on or after , in recognised stock exchange of India. The units of equity oriented mutual fund must be transferred to the mutual fund on or after Equity oriented fund means where the investible fund are invested by way of equity shares in domestic companies to the extent of more than 65% w.e.f Upto , it was 50%. 4

The shares must be transferred on or after 01.10.2004, in recognised stock exchange of India. The units of equity oriented mutual fund must be transferred to the mutual fund on or after 01.

5 Long Term Capital Gains on transfer of Equity shares/ units on payment of security transaction tax in case of Companies Section 10(38) W.e.f. assessment year , long term Capital Gains which are exempt u/s. 10(38), will be considered to calculate Book Profit u/s.115jb (2) explanation I (ii). It means while calculating the long term Capital Gains in case of companies on transfer of equity shares or units of mutual fund, such long term Capital Gain shall form the part of Book Profit without any exemption u/s.10(38). 5

10(38), will be considered to calculate Book Profit u/s.115jb (2) explanation I (ii).

6 Income of a shareholder on buy-back of unlisted shares by the Company Section 10(34A )- Exempt Income arising to a shareholder in respect of buy-back of unlisted shares by the company will be exempt u/s. 10(34A) w.e.f The exemption is available only when the additional income tax is payable on distributed income u/s.115qa by the Company which is opting for buy-back of unlisted shares. The additional income tax u/s. 115QA is 20% on the distributed income. 6

The exemption is available only when the additional income tax is payable on distributed income u/s.

7 Income of a shareholder on buy-back of unlisted shares by the Company Section 10(34A )- Exempt Distributed income means the consideration paid by the company on buyback of shares as reduced by the amount which was received by the company for issue of such shares under section 115QA explanation (ii). Buy-back means purchase by a company of it s own shares in accordance with section 77A of the Companies Act Even if the domestic company has no taxable income in the previous year, the additional income tax u/s.115qa(1) has to be paid Section 115QA(2). No deduction shall be allowed in respect of additional tax paid u/s.115qa(5). 7

Buy-back means purchase by a company of it s own shares in accordance with section 77A of the Companies Act 1956.

8 Section 55A: Reference to valuation officer To ascertain the FMV of the Capital Asset the assessing officer may refer the valuation of Capital Asset to the valuation officer. 8

9 Long Term Capital Gains in case of Non Residents on certain gains in case shares of Indian Companies are purchased in Indian Currency. Long Term capital Gains in case of Listed equity shares which are covered u/s. 10(38) of the Income Tax Act. The Capital Gain in such case shall be exempt to tax. Long Term Capital Gains in case of Listed equity shares where section 10(38) does not apply The Tax rate is 20% with Indexation. OR 10% without Indexation Unlisted Equity Shares The Tax rate is 20% with Indexation. 9

The Capital Gain in such case shall be exempt to tax.

10 Shares of Indian Companies purchased by Non Residents in Foreign Currency Listed Equity Shares Where section 10(38) applies The Capital Gain on shares shall be exempt. Listed Equity shares where section 10(38) does not apply In this Case as per the First Proviso to section 48 shall apply. The Tax rate shall be 10%. Unlisted Shares In this Case as per the First Proviso to section 48 shall apply. The Tax rate shall be 20%. 10

Listed Equity shares where section 10(38) does not apply In this Case as per the First Proviso to section

11 Long Term Capital Gains in case of Non Residents where debentures of Indian Companies are purchased in Indian Currency Listed Debentures First and Second proviso of Section 48 are not applicable and tax rate shall be 10% on such long term Capital Gains Unlisted Debentures First and Second proviso shall not be applicable and tax shall 20% on long Term Capital Gains 11

applicable and tax rate shall be 10% on such long term Capital Gains Unlisted Debentures

12 Long Term Capital Gains in case of Non Residents where debentures of Indian Companies are purchased in Foreign Currency Listed Debentures First proviso of section 48 is applicable and tax shall Unlisted Debentures First proviso of section 48 is applicable and tax shall 20% 12

First proviso of section 48 is applicable and tax shall be @10% Unlisted

13 Transactions not subject to Capital Gains section 47 Any distribution of Capital Asset on total or partial partition of HUF-section 47(i). Any transfer of Capital Asset under a gift or will or any irrevocable trust. However this will not be applicable to ESOP issued by Company to its employees in the form of Shares, debentures, warrants, etc.-section 47(iii) The transfer of Capital Asset by company to its subsidiary company provided that the parent company or it s nominees hold the whole of the share capital of the subsidiary company and the subsidiary company i.e. transferee company is an Indian Company.-section 47(iv). 13

However this will not be applicable to ESOP issued by Company to its employees in the form of Shares, debentures, warrants, etc.

14 Capital Gains not be Applicable Any transfer of Capital Asset by subsidiary company to its Holding company provided the whole of the share capital of subsidiary company is held by Holding Company and the transferee company i.e. Holding Company is an Indian Company.-Section 47(v)(a)&(b). (inserted w.e.f ) Any transfer of Capital Asset in a scheme of amalgamation by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company.-section 47(vi) ( inserted by Finance (No.2) Act 1967, w.e.f

15 Capital Gains not be Applicable-2 Any transfer in a demerger, of a Capital Asset by the demerged company to the resulting company, if the resulting company is an Indian company.-section 47(vib) Any transfer by a shareholder, in a scheme of amalgamation of a Capital Asset being a share or shares held by him in the amalgamating company if the transfer is made in consideration of the allotment to him of any share or shares in the amalgamated company and the amalgamated company is an Indian Company. Section 47(vii) 15

-section 47(vib) Any transfer by a shareholder, in a scheme of amalgamation of a Capital Asset being a share or shares held by

16 Capital Gains not be Applicable-3 Any transfer of Capital Assets being bonds or Global depository receipt, referred to in section 115AC(1) made outside India by a non resident to another non resident. Section 47(viia) Any transfer of agricultural land in India effected before the first day of March Section 47(viii). Any transfer of Capital Asset being any work of art, archaeological scientific or art collection, book, manuscript, drawings or paintings, phot or print to the Government or a University or National Museum, National Art Gallery, National Archives.-section 47(ix) 16

Section 47(viia) Any transfer of agricultural land in India effected before the first day of March 1970.-Section 47(viii).

17 Capital Gains not be Applicable-4 Any transfer by way of conversion of bonds or debentures or deposit certificate in any form of a company into shares or debentures of that company. Section 47(x). Any transfer of Capital Asset in reverse mortgage under the scheme made and notified by central Government. Section 47(xvi). 17

debentures of that company. Section 47(x).

18 Thank you 18

DIRECT TAX LAWS AMENDMENTS MADE BY THE FINANCE ACT, 2013

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