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CA Vishnu Ram
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Section 115BB of the Income Tax Act, 1961 – Tax on winnings from lotteries, crossword puzzles, card games, and other games of any sort or gambling or betting: "Where the total income of an assessee includes any income by way of winnings from lotteries, crossword puzzles, races including horse races,Read more

    Section 115BB of the Income Tax Act, 1961 – Tax on winnings from lotteries, crossword puzzles, card games, and other games of any sort or gambling or betting:

    “Where the total income of an assessee includes any income by way of winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of—
    (a) the amount of income-tax calculated on such income at the rate of 30%, and
    (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of such income.”

    Rate of Tax:

    • Flat 30% on the gross winnings (without any basic exemption limit).

    • Surcharge and cess (currently 4%) are added to the 30% tax.

    • No deduction of expenses or allowances is permitted against such income.

    • No benefit of slab rates or chapter VI-A deductions (like 80C, 80D, etc.) on this income.

    TDS Deduction – Section 194B:

    “If the winnings from lottery or game show or puzzle exceeds ₹10,000, the payer shall deduct TDS @30% before making the payment.”

    • For cash winnings, TDS is deducted directly.

    • For non-cash winnings (like car, bike, etc.), the winner must pay tax equivalent to the fair market value of the prize before claiming it, or the provider pays it on their behalf (grossing up required).

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CA Vishnu Ram
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Yes, dividend is taxable under the Income Tax Act, 1961. Here's a detailed, expert-level reply tailored to your rules: Dividend income is now taxable in the hands of the recipient/shareholder as per Section 56(2)(i), under the head "Income from Other Sources". Taxability of Dividend Income (From AYRead more

    Yes, dividend is taxable under the Income Tax Act, 1961. Here’s a detailed, expert-level reply tailored to your rules:

    Dividend income is now taxable in the hands of the recipient/shareholder as per Section 56(2)(i), under the head “Income from Other Sources”.

    Taxability of Dividend Income (From AY 2021-22 onwards):

    Recipient Tax Treatment
    Resident Individual Taxed at applicable slab rates under Income from Other Sources (Section 56)
    Domestic Company Taxed at applicable corporate tax rate
    Foreign Company/Non-resident Taxed @ 20% (plus surcharge and cess) under Section 115A(1)(a) (subject to DTAA)

    TDS on Dividend – Section 194 & 195:

    • Section 194:
      TDS @ 10% if the dividend paid to resident exceeds ₹5,000 in a financial year.

    • Section 195:
      TDS on dividend paid to non-resident is generally 20% (plus surcharge and cess), subject to benefits of DTAA.

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CA Vishnu Ram
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    As per Section 2(22) of the Income Tax Act, 1961, dividend includes both actual and deemed dividends. This refers to any distribution by a company out of its accumulated profits (whether capitalized or not), whether in cash or otherwise, to its shareholders. Example: Final dividend, interim dividendRead more

    As per Section 2(22) of the Income Tax Act, 1961, dividend includes both actual and deemed dividends.

    This refers to any distribution by a company out of its accumulated profits (whether capitalized or not), whether in cash or otherwise, to its shareholders.

    Example: Final dividend, interim dividend declared by a company to its equity shareholders.

    Deemed Dividend [Clauses (b) to (e) of Section 2(22)]

    Even if not expressly called “dividend”, the following distributions are deemed to be dividend and are taxable under the Income Tax Act:

    🔹 (b) Distribution of debentures or deposit certificates to shareholders:

    “Any distribution to shareholders of debentures, debenture stock, or deposit certificates in any form, to the extent it is out of accumulated profits.”

    🔹 Tax Treatment: Treated as dividend income.

    🔹 (c) Distribution on liquidation:

    “Any distribution made to shareholders at the time of liquidation to the extent of accumulated profits (before liquidation).”

    🔹 Important: Capital returned in excess of accumulated profits is not treated as dividend.

    🔹 (d) Distribution on reduction of capital:

    If a company reduces its share capital and pays back shareholders out of accumulated profits, such amount is treated as dividend.

    🔹 (e) Loans and advances to shareholders (Deemed Dividend):

    This is one of the most litigated and important clauses.

    If a closely held company (i.e. company in which public is not substantially interested) gives a loan or advance to:

    • A shareholder holding ≥10% voting power, or

    • Any concern in which such shareholder is substantially interested
      — then the loan/advance amount is treated as dividend to the extent of accumulated profits.

    🛑 Exception: It does not apply to a company in which the public is substantially interested (i.e., a listed company).

    📝 Clarification – What is NOT a Dividend (Section 2(22), Provisos):

    • Any distribution out of share premium account (Section 52 of Companies Act) – not considered dividend.

    • Buy-back of shares u/s 77A of Companies Act, 1956 – not treated as dividend, but subject to capital gains tax.

    • Distribution made on preference shares, unless covered under clause (a) to (e) – not deemed dividend.

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CA Vishnu Ram
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Key Sections Providing Exemptions & Benefits A. Section 54 What it covers:Exemption for long-term capital gains arising from the sale of a residential house property, when the gains are reinvested in purchasing or constructing another residential property. Key Conditions: The new residential proRead more

    Key Sections Providing Exemptions & Benefits

    A. Section 54

    • What it covers:
      Exemption for long-term capital gains arising from the sale of a residential house property, when the gains are reinvested in purchasing or constructing another residential property.

    • Key Conditions:

      • The new residential property must be purchased either one year before or two years after the sale (or constructed within three years from the date of sale).

      • The exemption applies to the extent of the capital gains invested.

    B. Section 54EC

    • What it covers:
      Exemption for long-term capital gains (arising from the sale of any asset) if the gains are invested in specified bonds (such as those issued by NHAI or REC) within six months of the asset transfer.

    • Key Conditions:

      • Investment limit is capped at ₹50 lakh per financial year.

      • The bonds have a specified lock-in period (generally three years).

    C. Section 54F

    • What it covers:
      Exemption on long-term capital gains derived from the sale of any asset (other than a residential house property) if the net sale consideration is invested in purchasing a residential house property.

    • Key Conditions:

      • The entire net sale consideration (not just the gain) must be invested.

      • The exemption is proportionate: if only a part of the sale consideration is invested, the exemption is limited accordingly.

    D. Section 55(2)

    • Indexation Benefit:
      For assets held as long-term capital assets, the Act permits the adjustment of the cost of acquisition using the Cost Inflation Index (CII), thereby reducing the taxable capital gain.

    Additional Strategic Hints for Tax Savings

    • Hold Long-Term:
      Assets held for the long term (as defined under the Act) not only qualify for lower tax rates compared to short-term gains but also benefit from indexation (Section 55(2)).
      Tip: Refrain from selling assets before the long-term holding period to take advantage of this benefit.

    • Plan Sale Transactions:
      Consider spreading the sale of assets over multiple financial years. This can help manage the overall taxable income and take advantage of lower tax slabs, especially for individual taxpayers.

    • Documentation & Timely Reinvestment:
      Ensure that reinvestments (as required under Sections 54, 54EC, or 54F) are executed within the prescribed time frames. Maintain all relevant documentation—such as purchase agreements, receipts, and bank statements—to support the claim for exemption during assessment.

    • Review Investment Limits:
      For Section 54EC, be aware of the ₹50 lakh investment ceiling. If your capital gains exceed this amount, plan other strategies for the remaining gains.

    • Utilize Tax Planning Tools:
      Use financial planning tools or consult professionals to estimate the tax impact of a sale and the extent of exemptions available. This preemptive planning helps in optimizing investment decisions.

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CA Vishnu Ram
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Steps to Compute the Short-Term Capital Gain (STCG) Step 1: Determine the Full Value of Consideration This is the total sale price received on the transfer of the equity shares or mutual fund units. Step 2: Deduct the Cost of Acquisition Subtract the original cost at which the shares or units were pRead more

    Steps to Compute the Short-Term Capital Gain (STCG)

    Step 1: Determine the Full Value of Consideration

    • This is the total sale price received on the transfer of the equity shares or mutual fund units.

    Step 2: Deduct the Cost of Acquisition

    • Subtract the original cost at which the shares or units were purchased.

    • Note: Since the holding period is less than 12 months, no indexation is allowed.

      • Formula: Cost of Acquisition = Purchase Price (as is)

    Step 3: Deduct Any Directly Attributable Expenses

    • This includes expenses such as brokerage fees, transaction charges, and any other expenses incurred in connection with the sale.

    • These expenses are deducted from the sale value.

    Step 4: Compute the Net Short-Term Capital Gain

    • Formula:
      STCG = (Full Value of Consideration) – (Cost of Acquisition + Directly Attributable Expenses)

    Step 5: Taxation of STCG

    • The net gain computed in Step 4 is then taxed at the flat rate of 15% under Section 111A.

    • After computing the tax at 15%, add applicable surcharge and cess to arrive at the total tax liability.

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CA Vishnu Ram
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  1. CA Vishnu Ram Enlightened

    Difference between Section 112 and Section 112A of Income Tax Act, 1961 1. Both sections cover the following Long Term Capital Asset:- Equity share in a company Unit of Equity Oriented Fund Unit of a business trust 2. Both the sections are related to tax on long-term capital and charged @ 10% subjecRead more

    Difference between Section 112 and Section 112A of Income Tax Act, 1961

    1. Both sections cover the following Long Term Capital Asset:-

    • Equity share in a company
    • Unit of Equity Oriented Fund
    • Unit of a business trust

    2. Both the sections are related to tax on long-term capital and charged @ 10% subject to fulfilment of conditions specified therein.

    S.No. Particulars Section 112 Section 112A
    1. What type of LTCA covers? Applies to transfer of all Long Term Capital Assets defined as per section 2(29A) of the Act. Applies to transfer of only following Long Term Capital Assets:- 

    • Equity share in a company
    • Unit of Equity Oriented Fund
    • Unit of a business trust
    2. Condition of payment of STT Applies on transfer of LTCA whether STT is paid or not. Applies only when following conditions are satisfied:-
    LTCA STT Paid
    On Acquisition On Transfer
    Equity share in a company Yes Yes
    Unit of Equity Oriented Fund No Yes
    Unit of a business trust No Yes
    However, above conditions are not applicable if transfer covers under sub-section (3) or (4).
    3. Tax Rate Tax Rate @ 20% or 10% Tax Rate only @ 10% in excess of Rs. 1 lakh.
    4. Exemption of Rs. 1 lakh No Yes
    5. Applicability Inserted by Finance Act, 1992 Inserted by Finance Act, 2018. Applicable w.e.f. 01-04-2019
    6. Relief u/s 87A Yes No
    7. Indexation benefit as per 2nd proviso to Section 48 Yes No
    8. Mode of Computation of Capital Gain in foreign currency in case of NR (1st proviso to Section 48) Yes No

     

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CA Vishnu Ram
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    The tax treatment for gains on the sale of unlisted shares depends primarily on the holding period: Short-Term Capital Gains (STCG):If the unlisted shares are held for less than 12 months, the gains are classified as short-term. Long-Term Capital Gains (LTCG):If the shares are held for 12 months orRead more

    The tax treatment for gains on the sale of unlisted shares depends primarily on the holding period:

    • Short-Term Capital Gains (STCG):
      If the unlisted shares are held for less than 12 months, the gains are classified as short-term.

    • Long-Term Capital Gains (LTCG):
      If the shares are held for 12 months or more, they qualify as long-term capital assets.

    Chargin sections

    Section 47 and Section 48 (Income Tax Act, 1961)

    • Section 47: Defines how gains arising from a transfer of a capital asset are computed.

    • Section 48: States that the capital gain is the difference between the full value of consideration and the (indexed) cost of acquisition, cost of improvement, and expenses incurred on transfer.

    Section 55(2)

    • This section prescribes the method for computing the Cost Inflation Index (CII), which is used to adjust the cost of acquisition of long-term assets, thereby reducing the taxable gain.

    Computation of Capital Gains

    A. Short-Term Capital Gains (STCG) on Unlisted Shares

    • Method:
      Since no indexation benefit is available, the capital gain is computed as:

      STCG=Sale Consideration−(Cost of Acquisition+Expense on Transfer+Cost of Improvement)

    • Tax Rate:
      The resulting gain is added to your total income and taxed at the applicable slab rates (if the taxpayer is an individual) or at the normal corporate tax rates (if a company).

    B. Long-Term Capital Gains (LTCG) on Unlisted Shares

    • Method:
      For unlisted shares held for 12 months or more, the cost of acquisition (plus cost of improvement and transfer expenses) must be indexed using the Cost Inflation Index from Section 55(2). The computation is:

      Indexed Cost of Acquisition=Cost of Acquisition×CII in the year of saleCII in the year of acquisition/CII in the year of acquisition. The LTCG is then calculated as:

    • LTCG=Sale Consideration−(Indexed Cost of Acquisition+Cost of Improvement+Expense on Transfer)

    • Tax Rate:
      The taxable LTCG is taxed at a flat rate of 20% (plus applicable surcharge and cess) as per the current provisions for long-term capital gains on unlisted shares.

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CA Vishnu Ram
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Step-by-Step Computation of LTCG Step 1: Determine the Full Value of Consideration (FVC) This is the total amount received from the sale of the asset.Example: If you sell a property for ₹50,00,000, then FVC = ₹50,00,000. Step 2: Determine the Cost of Acquisition (CoA) and Cost of Improvement (if anyRead more

    Step-by-Step Computation of LTCG

    Step 1: Determine the Full Value of Consideration (FVC)

    • This is the total amount received from the sale of the asset.
      Example: If you sell a property for ₹50,00,000, then FVC = ₹50,00,000.

    Step 2: Determine the Cost of Acquisition (CoA) and Cost of Improvement (if any)

    • Cost of Acquisition: The purchase price (plus any incidental expenses) at the time the asset was bought.

    • Cost of Improvement: Any capital expenditure on improvement (not repair) made during the holding period.

    Step 3: Indexation Benefit

    • Since the asset qualifies as long-term, you can adjust the original costs for inflation using the Cost Inflation Index (CII) as per Section 55(2).

      Indexed Cost of Acquisition =

      (Cost of Acquisition×CII in the year of acquisition)/CII in the year of sale

    • Similarly, calculate the Indexed Cost of Improvement if applicable.

     

    • Step 4: Deduct Directly Attributable Expenses

      • Include expenses incurred wholly and exclusively in connection with the transfer (for example, brokerage fees, stamp duty on transfer, legal fees).

      Step 5: Compute the Long-Term Capital Gain (LTCG)

      • LTCG = FVC – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses)

      Step 6: Apply the Tax Rate and Compute Tax Liability

      • Tax Rates:

        • For most assets (other than equity shares where specific rates apply), LTCG is taxed at 20% on the computed gain (plus applicable surcharge and cess).

        • For equity shares or equity-oriented mutual funds (where STT is paid), the LTCG is taxed at 10% on the gains exceeding an exemption threshold (currently ₹1,00,000) under Section 112A.

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CA Vishnu Ram
Enlightened
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  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    tep-by-Step Computation of STCG Step 1: Determine the Full Value of Consideration (FVC) This is the total sale price (or aggregate consideration) received from the transfer of the asset. Step 2: Determine the Cost of Acquisition & Directly Attributable Expenses Cost of Acquisition: The originalRead more

    tep-by-Step Computation of STCG

    Step 1: Determine the Full Value of Consideration (FVC)

    • This is the total sale price (or aggregate consideration) received from the transfer of the asset.

    Step 2: Determine the Cost of Acquisition & Directly Attributable Expenses

    • Cost of Acquisition: The original purchase price (plus any incidental costs incurred at the time of purchase).

    • Direct Expenses: Expenses incurred exclusively for facilitating the sale (e.g., brokerage, commission, transfer fees).

    Step 3: Calculate the Short-Term Capital Gain (STCG)

    • Use the formula:

    STCG=Full Value of Consideration(Cost of Acquisition+Directly Attributable Expenses)

    • Note: No indexation is allowed for short-term assets.

    Step 4: Determine the Tax Treatment Based on Asset Type

    1. For Equity Shares or Equity-Oriented Mutual Funds (with STT Paid):

      • Tax Rate: Under Section 111A, the resulting STCG is taxed at a flat rate of 15%.

        • Example:
          If you sell shares with a gain of ₹50,000 and STT has been paid, the tax payable is 15% of ₹50,000 (i.e., ₹7,500), plus applicable surcharge and cess.

      • For Other Assets or in Cases Where STT is Not Applicable:

        • The computed STCG is added to the total income and taxed at the applicable individual or corporate slab rate (as per Section 48).

        • Example:
          If you sell a non-equity asset with an STCG of ₹50,000, that amount is added to your income, and the tax rate applied will depend on your applicable income tax slab.

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