· The Finance Act, 2018 has introduced a new Section 112A which provides that long-term capital gains arising from transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, shall be taxed at 10% of such capital gains exceeding Rs. 1 lakh.
· Section 112A provides that the concessional rate of 10% shall be available if STT is paid both on acquisition and transfer of long-term capital asset, being listed equity shares. Therefore, in case STT is not paid at the time of acquisition of equity shares, the resultant long-term capital gains arising from its sale shall be governed by Section 112 and not by Section 112A.
· However, there are certain genuine off-market transactions which cannot be subject to STT at the time of acquisition. Therefore, in such scenario Section 112A(4) provides that the CG may notify the nature of acquisitions in respect of which the payment of STT at the time of acquisition shall not apply. Accordingly, CBDT has issued a draft notification under Section 112A.
· The exemption from payment of STT has been given for the following off-market transactions:
(a) Acquisition approved by the Supreme Court, High Court, National Company Law Tribunal, SEBI or RBI
(b) Acquisition by any non-resident in accordance with FDI guidelines
(c) Acquisition by an investment fund
(d) Acquisition through preferential issue to which Chapter VII of the SEBI Regulations does not apply
(e) Acquisition through an issue of share by a company
(f) Acquisition by scheduled banks, reconstruction or securitisation companies or public financial institutions during their ordinary course of business
(g) Acquisition under ESOP
(h) Acquisition under the SEBI Regulations 2011
(i) Acquisition from the Government
(j) Acquisition by mode of transfer if previous owner has acquired shares by any of the modes given in this list
(k) Acquisition by an investment fund referred to in clause (a) of the Explanation 1 to section 115UB or a venture capital fund referred to in section 10(23BF) or a Qualified Institutional Buyer
For further reading, refer the attachment.