CMA Intermediate · Direct and Indirect Taxation · Capital Gains
An FII (not a specified fund) earns long-term capital gains of ₹5,00,000 from transfer of securities, all of which are gains referred to in section 198. Under section 210, Sl. No. 5, what is the tax at the special rate before surcharge and cess?
Tax is ₹46,875. Section 210 applies the 12.5% rate only to section 198 long-term gains exceeding ₹1,25,000. The excess is ₹3,75,000, and 12.5% of that is ₹46,875. Charging the full ₹5,00,000 would wrongly give ₹62,500.
- A₹62,500
- B₹46,875Correct
- C₹1,00,000
- D₹47,500
Explanation
Section 210 taxes at 12.5% only the section 198 long-term gains exceeding ₹1,25,000. Taxable portion = 5,00,000 - 1,25,000 = 3,75,000. Tax = 3,75,000 x 12.5% = 46,875. Applying 12.5% on the full 5,00,000 gives 62,500, which ignores the threshold.
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