|
Capital
Gains
Computation
of LONG TERM CAPITAL gains tax
Resident
Individuals and Hindu Undivided Families
The
tax on long term capital gains is computed after following the steps
given hereafter . First the total taxable income of the assessee
is reduced by the amount of long term capital gains included in
the total income and the tax is calculated on the balance income
as if it were the total taxable income of the assessee. To this
figure the tax on long term capital gain is added which is 20% of
the capital gains.
However,
where the total income as reduced by long term capital gains is
below the maximum amount not chargeable to income tax, then tax
at the rate of 20% shall be chargeable only on so much of the capital
gains which together with the other income exceeds the maximum amount
not chargeable to tax.
For
example, let us suppose Mr. 'A' for assessment year 1997-98 has
long term capital gains of Rs. 25,000 and his income from other
sources is also Rs. 25,000 . Since no tax is payable on total income
up to Rs. 40,000, tax on Rs. 10,000 (Rs. 25,000 + Rs. 25,000 - Rs.
40,000) only will be chargeable at the rate of 20%.
It
has also been provided that deductions under Chapter VIA (for example
80G, 80L etc.) shall not be allowed from capital gains. Similarly,
tax rebate under section 88 shall not be allowed out of tax payable
on capital gains. 
Domestic
companies and other residents
Tax
at the rate of 20% is payable on long term capital gains by the
Domestic Companies and other Residents calculated in the same fashion
as in the case of resident Individuals and HUFs.
Overseas
Financial Organisation
An
Overseas Financial Organisation means any fund, institution, association
or body, whether incorporated or not, established under the laws
of a country outside India, which has entered into an agreement
for investment in India with any public sector bank or public financial
institution or a specified mutual fund and such agreement should
be approved by the Central Government. In the case of such offshore
funds long term capital gain arising from the transfer of units
of UTI or Mutual Funds purchased in foreign currency shall be taxed
@ 10% only. It has been provided that the deductions laid down under
Section 28 to 44C or Section 57 or under Chapter VI-A shall not
be allowed from such capital gains. The benefit of indexation of
cost of acquisition is also not available to the off shore fund.
ADRs/GDRs
In
the case of non resident who declare long term capital gains on
sale of bonds or shares of an Indian company or a public sector
company which were acquired by the assessee in foreign currency
under a scheme approved by the Central Government , tax at the rate
of 10% is payable by the non resident on such long term capital
gains. These schemes are popularly known as ADRs and GDRs. As in
the case of an offshore fund the deductions laid down under Sections
28 to 44C or Section 57 or under Chapter VI-A shall not be allowed.
The benefit of indexation of cost is also not available.
Foreign
Institutional Investors
A notified
Foreign Institutional Investor is required to pay tax at the rate
of 30% on short term capital gains and 10% on long term capital
gains arising out of transfer of securities (other than the units
referred to above in the case of Offshore Funds). As in the case
of Offshore Funds and non residents investing in units, tax will
be levied on the gross amount of capital gains. No deductiopns shall
be allowed from this amount even under the sections relating to
' Profit & Gains from Business or Profession' or 'Income from
other sources' or under Chapter VI-A. Similarly indexation of cost
of acquisition is also not allowed.
Non
resident Indians
In
the case of non residents Long term capital gains arising on transfer
of a 'specified asset' as defined in clause (f) of section 115C
of the Act is taxed @ 10%. Specified asset means shares of the Indian
company , debentures of and deposits of an Indian company other
than a private company and Government securities or notified assets
. All other long term capital gains are taxed @ 20%. However no
deduction is allowable under chapter VIA and no indexation of cost
of acquisition of asset is permitted.
Foreign
Companies and non-corporate non residents
Tax
at the rate of @ 20% is payable on long term capital gains.
|
