Rates of Tax (Part - 2) - Taxation | Income Tax for assessment (Inter Level) PDF Download

Rates of Tax - Taxation

SECURITIES TRANSACTION TAX (STT)

Securities transaction tax (STT) is applicable if:

1. An equity share in a company is entered into a recognised stock exchange of India; or

2. A unit of an equity oriented fund [Where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 65% of the total proceeds of such fund]

- if such unit of equity oriented fund is entered into a recognised stock exchange of India; or

- Unit of an equity oriented fund is transferred to the Mutual Fund itself. (Repurchase)

Note 1: STT is not applicable on sale of preference shares, debt oriented mutual fund, all unlisted securities, all non financial assets, land, building, gold etc.
Note 2: STT is not applicable in case of buy back of shares, open offer for sale, sale of right share entitlement, delisted shares or negotiated deals etc., since all such transactions falls outside stock exchange.
Note 3 : Sale of unlisted equity shares by any holder of such shares under an offer for sale to the public included in IPO and such shares are subsequently listed in RSE will also be subjected to STT. This STT is payable by seller and collected by Lead merchant banker.

Section 111A. Tax on Short Term Capital Gain

1. Short term capital gain shall be taxed @ 15% if securities transaction tax is applicable.

2. If STT is not applicable STCG is treated as normal income and therefore taxed at normal rates.

Section 112. Tax on Long Term Capital Gain

1. Where securities transaction tax is applicable, such long term capital gain is fully exempt from tax under section 10(38).

2. In case of following ‘Listed Financial Assets’ Tax on LTCG is 10% without indexation or 20% with indexation whichever is lower. Surcharge and education cess as applicable.

Meaning of ‘Listed financial assets’

a. Listed Shares (Equity / Preference) in a Company. (Public / Private / Listed / Unlisted)

b. Listed bonds or debentures.

c. Units of equity oriented fund.

d. Government securities.

e. Rights or interest in such securities.

3. In case of other assets tax on long term capital gain shall be chargeable to tax @ 20% flat.

P1: Compute tax in case of LTCG arising on sale of

1. Listed equity shares.

2. Listed preference shares

3. Units of equity oriented fund.

4. Buyback of units of equity oriented fund.

5. Unlisted bonds

6. Listed bonds

7. Buyback of listed bonus shares allotted on 1-6-1999

8. Self generated assets

9. Govt securities

10. Shares in a Aurus Technology (Private) Linited.

Ans: (1) nil (2) 10% or 20% lower (3) nil (4) nil (5) 20% (6) 10% (7) 10%(8) 20% (9) 10% or 20% lower (10) 10%

P2

1. The rate of tax on transfer of shares is tax free or is taxable @ 15%. Do you agree.

2. What about transactions entered outside stock market ?

Solution

1. Yes. LTCG arising on sale of equity shares or units of  equity oriented fund through stock market is fully exempt from tax. LTCG arising on sale of shares privately is subjected to either 10% or 20% whichever is lower. However STCG arising on transfer of equity shares or units of equity oriented fund through stock market is subject @ 15%.

2. LTCG is subject to either 10% or 20% as a case may be and STCG at normal rates.

P3 : Compute tax on following categories of incomes on the assumption that the assessee is an individual having other income of more than basic exemption:

1. LTCG arising on sale of residential house property                                         60,000

2. LTCG arising on sale of unlisted bonds                                                           80,000

3. LTCG arising on sale of listed bonus shares (STT paid)                              1,00,000

4. LTCG arising on sale of unlisted bonus shares                                          12,50,000

5. STCG arising on sale of listed bonus shares (STT paid)                                70,000

6. STCG arising on sale of unlisted bonus shares                                         11,00,000

7. LTCG arising on sale goodwill of a business                                               1,10,000

Ans: (1) 12,360; (2) 16,480; (3) nil; (4) 2,57,500; (5) 10,815; (6) 1,59,650; (7) 22,660.

P4: Compute tax on LTCG for the AY 2017-18 from the following information assuming his other income exceeds basic exemption: X sells Govt. Securities which was acquired in the PY 2014-15 Rs 22,000. Sold for in the PY 2016-17 for Rs 4,00,000.

Computation of Capital gain for the Ay 2017-18

Option 1 is better since tax is lower. Tax including education cess shall be Rs 38,934

P5: Compute tax on LTCG for the AY 2017-18 from the following information assuming his other income exceeds basic exemption: X sells Govt. Securities which was acquired in the PY 2001-02 Rs 1,18,000. Sold for for Rs 3,45,000 in the year 2016-17.

Ans: 6,876

P6: Compute total income and tax liability of Mr.X.

Solution

Computation of total income

Computation of tax liability

Extra Topics

Marginal Relief

Why marginal relief? As you know in case of Company surcharge @ 7% is levied if total income exceeds Rs 1 crore. Let us examine this point.

If total income is Rs 1,00,00,000, your tax liability is Rs 30,00,000; now if your total income is Rs 1,01,00,000 your tax liability is Rs 32,42,100 including surcharge @ 7%. If you examine closely income increases by Rs 1,00,000 however your tax liability increase by Rs 2,42,100. Therefore to offset this precarious situation marginal relief is provided which is computed by using following formula:

Marginal relief (MR) = Increase in income –  increase in tax liability.

Therefore marginal relief = 1,00,000 – 2,42,100 = 1,42,100.

P1: Compute relief u/s 89 from the following information. Salary of the PY 2013-14 Rs 7,00,000. On 1-4-2014 his salary is increased with effect from 1-4-2013 to Rs 9,00,000. Arrears of salary received in the PY 2014-15 Rs 2,00,000. Assume that slab rate of PY 14-15 is applicable in PY 13-14 also.

Ans: 10,300. Tax payable in PY 14-15 1,54,500

TAX ON CO-OPERATIVE SOCIETY

Normal Income                                                 Rates of tax

Upto Rs 10,000                                                        10% 

Next Rs 10,000                                                        20%

Balance                                                                   30%
Surcharge                                                               12% if TI exceeds 1 crore

Education cess                                                        3%

Special income                                                      Special rates

Casual Income                                                        30%

TAX ON LOCAL AUTHORITY

On Normal income 30% flat. Surcharge @ 12% if TI exceeds 1 crore. Education cess @ 3% is levied.

SLAB RATE OF OLD ASSESSMENT YEAR