Can Deduction Be Claimed Against Long Term Capital Gains?

In case one wants to save taxes payable against long term capital gains can investment in Insurance with lock in exceeding 3 years be used as a tool. Puneet Jain,Delhi

The long term capital gains are taxed u/s 112A of the I T Act. Following are important points related to taxation of Long term capital gains

1. For  Long term capital gains on asset other than listed shares are taxed @ 20 %.

2. Long term capital  gains on listed shares sold through Stock Exchange is tax free u/s 10(38).

3.Long Term Capital gains on listed shares not sold through stock exchange are taxed either @ 20 % with indexation or 10 %   in case gains are computed without indexation benefit.

No deduction u/s section 80C or any deduction under chapter VI-A  like 80D or 80DD etc are allowable. This is written in sub-section 2 of section 112A of the I T Act which is as under:

(2) Where the gross total income of an assessee includes any income arising from the transfer of a long-term capital asset, the gross total income shall be reduced by the amount of such income and the deduction under Chapter VI-A shall be allowed as if the gross total income as so reduced were the gross total income of the assessee.

What the aforesaid provision states is that  the maximum deduction u/s Chapter VIA under which dedcution u/s 80C or 80D or 80 DD or *)DDB or 80U and all others fall can be limited to Gross Total income minus long term capital gains.

In other words, you can not avail of deduction by investing in insurance with lock in exceeding 3 years against the long term capital gains.