In this article, we will discuss about the Special Tax Rates Applicable on Special Income such as Short Term Capital Gain, Long Term Capital Gain, Virtual Digital Assets, Casual Income, Lottery Income etc. as follows:
Short Term Capital Gain (STCG) u/s 111A:
(i). STCG u/s 111A is applicable in case of CG arising on transfer of equity shares or units of equity oriented MF or units of business trust.
(ii). Period of Holding (POH) of < 12 months will be considered
(iii). STCG is charged to tax at special 15% flat rate u/s 111A + surcharge (if any) + 4% cess (always).
(iv). NO deduction under sections 80C to 80U is allowed against STCG u/s 111A.
(v). Basic Exemption Limit (BEL) benefit is allowed ONLY to the RESIDENT Individual. NO BEL is allowed to NRI individuals against STCG income u/s 111A.
(vi). Rebate u/s 87A is allowed if total income is upto Rs 5 Lakhs & it includes STCG income u/s 111A.
(vii). Maximum Surcharge applicable on STCG u/s 111A is restricted to 15% only.
(viii). In case of Short Term Capital Loss (STCL) u/s 111A, it can be SET-OFF ONLY against STCG or LTCG in the SAME financial year.
(ix). In case, if any STCL need to be carry forward then ITR need to be filed on or before the due date (i.e. 31st July of assessment year) specified u/s 139(1).
(x). STCL can be carry forward for 8 assessment year (AY) & to be set off only against STCG or LTCG & NOT against any other income.
Long Term Capital Gain (LTCG) u/s 112A:
(i). LTCG u/s 112A is applicable in case of CG arising on transfer of equity shares or units of equity oriented MF or units of business trust.
(ii). POH of > 12 months will be considered
(iii). LTCG is charged to tax at special 10% flat rate u/s 112A + surcharge (if any) + 4% cess (always).
(iv). Adhoc deduction of Rs 1 lakh on gain amount of LTCG u/s 112A is available in each financial year to the RESIDENT & NRI Individuals.
(v). NO deduction under sections 80C to 80U is allowed
(vi). BEL benefit is allowed ONLY to the RESIDENT Individual. NO BEL is allowed to NRI individuals against LTCG income u/s 112A.
(vii). Rebate u/s 87A is NOT allowed on LTCG income u/s 112A.
(viii). NO Indexation benefit is allowed on LTCG income u/s 112A.
(ix). Grandfathering Concept will apply if Shares or MF is purchased before 1st February, 2018 to give higher exemption from Cost of Acquisition (COA).
COA shall be deemed to be higher of the following if listed equity shares or MF purchased before 1st February, 2018:
a) Actual cost of acquisition
b) Lower of the following:
- i) Fair Market Value (FMV) of such shares as on January 31,2018, or
- ii) Actual sales consideration accruing on its transfer.
(x). Maximum Surcharge applicable on LTCG u/s 112A is restricted to 15% only.
(xi). In case of Long Term Capital Loss (LTCL) u/s 112A, it can be SET-OFF ONLY against LTCG in the SAME financial year.
(xii). In case, if any LTCL need to be carry forward then ITR need to be filed on or before the due date (i.e. 31st July of assessment year) specified u/s 139(1).
(xiii). LTCL can be carry forward for 8 assessment year (AY) & to be set off ONLY against LTCG & NOT against any other income.
(ivx). If any ULIP is taxable as per amendment in Finance Act, 2021 if the aggregate premium amount paid exceeds Rs 2.5 Lakhs on single or multiple ULIP plans, then any amount received (including bonus) on maturity will be taxable as LTCG u/s 112A @ 10% over & above Rs 1 lakh + 4% cess (always) + Surcharge (If any).
However, NO TAXABILITY will arise in case of DEATH of an individual.
Long Term Capital Gain (LTCG) u/s 112:
(1). LTCG u/s 112 is applicable in case of CG arising on Sale of Immovable Property.
(2). LTCG u/s 112 will apply on Sales Consideration – Cost of Acquisition.
(3). POH of > 24 months will be considered
(4). LTCG is charged to tax at special rate @ 20% u/s 112 + surcharge (if any) + 4% cess (always).
(5). INDEXATION benefit is ALLOWED on LTCG income u/s 112. Cost of Improvement is also allowed if immovable property is purchased on or after 01.04.2001.
(6). NO deduction under sections 80C to 80U is allowed
(7). BEL benefit is allowed ONLY to the RESIDENT Individual. NO BEL is allowed to NRI individuals against LTCG income u/s 112.
(8). Rebate u/s 87A is allowed if total income is upto Rs 5 Lakhs & it includes LTCG income u/s 112.
(9). Maximum Surcharge applicable on LTCG u/s 112 is restricted to 15% only.
(10). In case of LTCG u/s 112, Exemption u/s 54, 54F & 54EC can be claimed by the individual selling the property as per the term & condition mention in these specific sections.
(11). TDS u/s 194IA is deducted @ 1% of actual sales consideration or SDV value, whichever is higher if amount exceeds Rs 50 Lakhs in case of Resident Individuals by the buyer & Form 26QB need to be filed by the buyer.
(12). In case of NRI Individuals, TDS is deducted u/s 195 at applicable slab rates + surcharge (if any) + cess @ 4% (always) even if actual sales consideration or SDV value amount is less than Rs 50 Lakhs. TDS is required to be deducted by the buyer & prescribed form need to be filed by the buyer.
(13). In case of Long-Term Capital Loss (LTCL) u/s 112, it can be SET-OFF ONLY against LTCG in the SAME financial year.
(14). In case, if any LTCL need to be carry forward then ITR need to be filed on or before the due date (i.e. 31st July of assessment year) specified u/s 139(1).
(15). LTCL can be carry forward for 8 assessment year (AY) & to be set off ONLY against LTCG & NOT against any other income.
(16). In case any ADVANCE MONEY is FORFEITED on failure of negotiations for transfer of capital assets then:
- a) If advance money was received & forfeited before 01/04/2014, then deducted from cost of acquisition while computing CG.
- b) If advance money was received & forfeited after 01/04/2014, then it will be taxable as “Income from Other Sources”.
Taxability of Virtual Digital Assets (VDA) u/s 115BBH:
(1). VDA is taxable @ 30% flat rate on GAIN amount (i.e. Sale Consideration – Cost of Acquisition) u/s 115BBH.
(2). NO deduction under sections 80C to 80U is allowed against VDA
(3). NO Basic exemption limit benefit is allowed against VDA
(4). NO Set off of losses of VDA is allowed against any other income & further NO carry forward of losses of VDA is allowed.
(5). Rebate u/s 87A is allowed if total income is upto Rs 5 Lakhs & it includes VDA income u/s 115BBH.
(6). TDS u/s 194S @ 1% will be deducted on actual sale consideration of VDA paid to any resident individual if the amount paid is more than Rs 50,000 if the individual is NOT engaged in any business or profession.
If individual is engaged in any business or profession, then the limit of TDS deduction will be Rs 10,000.
Winnings from Lottery, Betting, Gambling, Crossword Puzzles, Horse Racing, Game Show, Sporting Event etc. u/s 115BB
(1). Tax on winnings from Lottery, Betting, Gambling, Crossword Puzzles, Horse Racing, Game Show, Sporting Event etc. is at special flat rate of 30% + Health & Education Cess @ 4% (always).
(2). In Case Winning amount is received in KIND (without monetary benefit), for example – any car gifted or gold chain gifted, then tax will be determined on the basis of MARKET VALUE (MV) of the received item.
(3). Winning prizes earned will be taxable in the hands of the winner under the head “Income from Other Sources”.
(4). NO deduction under sections 80C to 80U is allowed, NO Basic exemption limit benefit is allowed & also NO claim of any expenses is allowed against such incomes.
(5). NO Rebate u/s 87A is allowed against such incomes if total income is upto Rs 5 Lakhs
(6). NO Set off of losses is allowed against any other income & further NO carry forward of losses is allowed.
(7). Loss from owning & maintaining a horse race CANNOT be set off against any other income EXCEPT Horse Race Income. However, carry forward of remaining loss is allowed for 4 assessment years.
(8). TDS u/s 194B is applicable on winning from Lottery, Betting, Gambling, Crossword Puzzles, Game Show, Sporting Event etc., if winning income exceeds Rs 10,000 during the financial year, the prize distributor is liable to deduct TDS @ 31.2% when making the payment.
(9). TDS u/s 194BB is applicable on winning income from activity of owning & maintaining horse races, if winning income exceeds Rs 10,000 during the financial year, the horse race organizer is liable to deduct TDS @ 31.2% when making the payment.
(10). REFUND of TDS deducted u/s 194B is NOT allowed.
UNEXPLAINED Money, Investments, Expenditures etc. u/s 115BBE:
(1). Any UNEXPLAINED Money, Investments, Expenditures etc. specified u/s 68 to 69D will be taxed at special rate @ 60% tax u/s 115 BBE + 25% Surcharge (always) + 4% cess (always).
Effective Tax rate will be 78%
(2). NO Basic exemption limit, NO deduction under sections 80C to 80U & also NO claim of any expenses is allowed against such incomes.
(3). NO Set off of losses is allowed against any other income.
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