Understanding STT: Differences Between Section 111A and 112A Explained
Explore the key differences between STT under section 111A and 112A, focusing on taxation of short-term and long-term capital gains.
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STT (Securities Transaction Tax) under section 111A applies to short-term capital gains from equity shares or equity-oriented mutual funds. These gains are taxed at 15%. Section 112A deals with long-term capital gains exceeding ₹1 lakh from similar securities, taxed at 10% without indexation benefits. Both ensure efficient tax compliance while differentiating based on the holding period.
FAQs & Answers
- What is Securities Transaction Tax (STT)? Securities Transaction Tax (STT) is a tax levied on transactions made on the stock exchange for buying and selling securities. It is applicable to both equity shares and equity-oriented mutual funds.
- How is STT calculated under section 111A? Under section 111A, STT is applicable to short-term capital gains from equity shares or equity-oriented mutual funds, which are taxed at a rate of 15%.
- What are the tax implications of long-term capital gains under section 112A? Section 112A applies to long-term capital gains exceeding ₹1 lakh from equity shares or mutual funds, taxed at 10% without indexation benefits, which allows for efficient tax compliance.
- What is the holding period for capital gains tax under sections 111A and 112A? For section 111A, the holding period must be less than 12 months to classify as short-term capital gains. In contrast, section 112A applies to assets held for more than 12 months, qualifying them for long-term capital gains taxation.