Short term capital gains tax in respect of equity shares/ units of an equity oriented fund [Section 111A] :

(i) This section provides for a concessional rate of tax (i.e. 15%) on the short-term capital gains on transfer of –

(1) an equity share in a company or

(2) a unit of an equity oriented fund or

(3) a unit of a business trust.

(ii) The conditions for availing the benefit of this concessional rate are –

(1) the transaction of sale of such equity share or unit should be entered into on or after 1.10.2004, being the date on which Chapter VII of the Finance (No. 2) Act, 2004 came into force; and

(2) such transaction should be chargeable to securities transaction tax under the said Chapter.

(iii) The proviso to this section provides that in the case of resident individuals or HUF, if the basic exemption is not fully exhausted by any other income, then the short-term capital gain will be reduced by the unexhausted basic exemption limit and only the balance would be taxed at 15%. However, the benefit of availing the basic exemption limit is not available in the case of non-residents.

(iv) Deductions under Chapter VI-A cannot be availed in respect of such short-term capital gains on equity shares of a company or units of an equity oriented mutual fund included in the total income of the assessee.

The expression “equity oriented fund” has the same meaning assigned to it in the explanation to section 10(38) i.e., “Equity oriented fund” means a fund –

(1) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 65% of the total proceeds of such fund; and

(2) which has been set up under a scheme of a Mutual Fund specified under clause (23D).