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Section 111A - Tax on Short Term Capital Gains in certain cases - Income Tax - Ready Reckoner - Income TaxExtract Section 111A : Tax on Short Term Capital Gains in respect of Equity Share/Units of an Equity Oriented Fund/ Units of a Business Trust The section deals with the capital gain from transfer of listed equity shares, units of equity oriented fund. It is applicable only if STT (security transaction tax) is paid. Section 111A(1) shall be applicable to all assessees including non-residents, if all the following conditions are fulfilled :- The gains arise from transfer of a short term capital asset Being an equity share in a company or a unit of an Equity oriented Fund or units of a business trust and The transaction of sale Is chargeable to securities transaction tax (STT). 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 15% ; 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. In case of a transaction undertaken on a recognised stock exchange located in any International Financial Services Centre (IFSC) and the consideration for such transaction is paid or payable in foreign currency, then section 111A shall be applicable even if the securities transaction has not been paid. Section 111A(2) No deduction under chapter Vi-A against STCG taxable under section 111A. Deduction under Chapter VIA shall not be allowed on STCG referred to in Section 111A. STCG other than referred in Section 111A shall be taxable at normal rates applicable to the assessee. Adjustment of unexhausted Basie Exemption Limit In case of resident individual or HUF, if the basic exemption is not fully exhausted by any other income, then the short capital gain will be reduced by the unexhausted basic exemption limit and only the balance would be taxed at 15%. The benefit of availing the basic exemption limit is not available in the case of non-resident. Notes:- Section 111A is not applicable where the shareholders sell the units of business trust which were acquired by him in exchange of shares of SPV. Normal tax rates shall apply on STCG arising on sale of such units of business trust. Taxability of ULIP on sale or redemption [Amendment made by Finance Act, 2021 ] 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.
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