Understanding the Exemption of Section 112A: Tax Benefits for Capital Gains

Learn about the tax exemption under Section 112A for long-term capital gains on equity and mutual funds.

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Section 112A of the Income Tax Act, 1961, provides a special provision for tax on long-term capital gains (LTCG). Gains exceeding INR 1 lakh from listed equity shares and equity-oriented mutual funds are taxed at 10% without the benefit of indexation. However, gains up to INR 1 lakh are exempt from tax under this section, offering relief to small investors.

FAQs & Answers

  1. What is Section 112A of the Income Tax Act? Section 112A of the Income Tax Act, 1961, provides a special provision for taxing long-term capital gains from listed equity shares and equity-oriented mutual funds.
  2. How are long-term capital gains taxed under Section 112A? Long-term capital gains exceeding INR 1 lakh are taxed at a rate of 10% under Section 112A, without the benefit of indexation.
  3. What is the exemption limit for long-term capital gains? The exemption limit for long-term capital gains under Section 112A is INR 1 lakh, meaning gains up to this amount are not taxed.
  4. Who benefits from the exemption under Section 112A? Small investors benefit from the exemption under Section 112A, as gains up to INR 1 lakh are not subject to tax.

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