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Indexation of listed securities

10 December 2017

if we need to find out long term capital gain on transfer of listed securities then we should use indexation or not?why?

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11 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (161401 Points)
Replied 10 December 2017

As long term capital gain of listed securities is tax-exempt u/s. 10(38) when sold through registered SE, it hardly affects; otherwise indexation is applied.

Navneeth Ojha (Student CA Final ) (116 Points)
Replied 10 December 2017

If the securities are listed and STT paid then capital gain exempt u/s 10(38) only for following: Listed equity sh., Listed equity oriented funds., Units of Business Trust...
in case of other than above three...tax will be @ 20%.
In case STT not paid on securities and if u take indexation benefit then tax rate would be @ 20% and without indexation tax would be @ 10% for Listed equity sh., Listed equity oriented funds., Units of Business Trust...
In case STT not paid on securities other than above specified three items tax would be 20%

Phalguni Khilar (45 Points)
Replied 10 December 2017

good.but i think u can explain me more easily

Navneeth Ojha (Student CA Final ) (116 Points)
Replied 10 December 2017

u can use indexation only when 2conditions satisfy:
1. STT is not paid on securities
"and"
2. the securities are among those "three" mentioned above...
after satisfying above two conditions opting indexation or not is purely the discretion(choice) of assessee.
if u opt index then tax will be @ 20%, if u don't then tax @ 10%

1 Like

Pardeep Garg (CA-Final Student) (801 Points)
Replied 10 December 2017

but @ ojha ji, '20%if indexation,10%if not indexation' is for long term capital assets viz. Listed securities(other than a unit) ie a Zero coupon bond (sec. 112).

Phalguni Khilar (45 Points)
Replied 10 December 2017

am still not understood.in my book there is a question and in it ,securities listed is acquired on 1-1-1999 (CII-351) ,FMV on 1-4-81 was ₹100000 and it was sold in 2016-17 (CII- 1125) for 260000.
then what amount of LTCG is obtained?

Navneeth Ojha (Student CA Final ) (116 Points)
Replied 11 December 2017

Pradeep specify what fault u observed...

Pardeep Garg (CA-Final Student) (801 Points)
Replied 11 December 2017

@ ojha u r ryt, I just explained it.

Pardeep Garg (CA-Final Student) (801 Points)
Replied 11 December 2017

@ khilar ji what is cost of acquisition on 1-1-1999, only then LTCG can be obtained.

daya thakur (2 Points)
Replied 11 December 2017

how will I calculate short term gain in demerger of stocks case.may I sell demerged stocks to get benefit of short term gain .

Anurag lohiya (Bara bazar) (262 Points)
Replied 11 December 2017

Section 10(38) LTCG on listed share/ Units of Equity oriented Mutual funds/ Units of Business Trust are exempt.
Provied:
1. STT is paid on acquisation and sale of capital asset.

The other secturities other than specifies above is not exempt and would attract section 112.
Tax @ 20% with indexation (i.e. Proviso 2 to section 48 subject to proviso 3 of section 48 i.e. no indexation on bond etc except Soverign gold bonds)
Tax @ 10% without indexation.

Please note:
where proviso 1 to section 48 applies , Proviso 2 does not apply.
Gold Monetisation bond are kept outside the defination of capital asset u/s 2(14).