Section 112 Vs. 112A Income Tax
Section 112 and Section 112A of the Income Tax Act, 1961 address the taxation of long-term capital gains from the sale of listed equity shares or equity-oriented mutual funds. However, there are several distinctions between these two sections Section 112 Vs. 112A Income Tax.
Applicability: Section 112 covers all long-term capital gains from the sale of listed securities or equity-oriented mutual funds. In contrast, Section 112A specifically applies to long-term capital gains arising from the sale of listed equity shares or equity-oriented mutual funds.
For site: https://www.incometax.gov.in
Tax Rate: Under Section 112, long-term capital gains are taxed at a flat rate of 20%. Conversely, Section 112A imposes a tax rate of 10% on gains exceeding Rs. 1 lakh.
Cost Inflation Index (CII): Section 112 allows for indexation, which accounts for the impact of inflation on the acquisition cost of the asset. In contrast, Section 112A does not offer the benefit of indexation.
Grandfathering Clause: Section 112A includes a grandfathering clause that provides relief to taxpayers who acquired shares before January 31, 2018. It allows them to consider either the fair market value of the shares as of January 31, 2018, or the actual cost of acquisition as the cost of acquisition for calculating capital gains.
To summarize, while both Section 112 and Section 112A pertain to the taxation of long-term capital gains from the sale of listed securities or equity-oriented mutual funds, Section 112A applies solely to listed equity shares or equity-oriented mutual funds. It features a lower tax rate (10%) for gains exceeding Rs. 1 lakh but does not permit the benefit of indexation. Section 112 Vs. 112A Income Tax is very crucial under income tax.
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