Section 112A is a provision under the Income Tax Act of India that deals with the taxation of long-term capital gains (LTCG) from the sale of listed equity shares and equity-oriented mutual funds. Introduced in the Finance Act 2018, this section applies when such assets are sold after being held for more than one year.
Under Section 112A, long-term capital gains exceeding ₹1 lakh in a financial year are taxed at a flat rate of 10%, without the benefit of indexation. This means that if your gains from selling listed shares or equity mutual funds cross the ₹1 lakh threshold, you will pay tax only on the amount exceeding this limit, making it easier for investors and small business owners to plan their finances.
This section is important for taxpayers involved in trading or investing in the stock market, as it helps clarify the tax treatment on profits from such investments. It ensures that capital gains from equities are taxed fairly while providing a threshold that helps avoid tax on smaller gains.
For businesses and individuals managing their tax filings, understanding Section 112A is crucial to comply with tax regulations properly and avoid penalties. Proper reporting of these gains during income tax filings ensures smooth compliance and accurate tax calculation.
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