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Discussion > Income Tax > Tax queries >

long term Capital Gain on Unlisted shares

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Raza (CA Final)


[ Scorecard : 3655]
Posted On 07 September 2009 at 15:24 Report Abuse

There are two option for calculating long term capital gain on unlisted share.

1st is by Indexing and the 2nd is without indexing.

Can any one explain without indexing method...........bcoz I am not getting in books


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GPK - Dubai
Practicing Chartered Accountant


[ Scorecard : 1304]
Posted On 07 September 2009 at 15:31

Friend,

 

The two method for computing LTCG on Shares with and without indexation is stated in provisio to section 112 of IT Act requires following;

 

Section 112

Provided

that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being listed securities 10[or unit] 11[or zero coupon bond], exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.

12[Explanation.—For the purposes of this sub-section,—
              (a)   “listed securities” means the securities—
         (i)   as defined in clause (h) of section 213 of the Securities Contracts (Regulation) Act, 1956 (32 of 1956); and
        (ii)   listed in any recognised stock exchange in India;
              (b)   “unit” shall have the meaning assigned to it in clause (b) of Explanation to section 115AB.]]

 

In view of above, transfer of shares of an unlisted company shall not have benifit of the above provisio and shall be taxed @  20% rate.

 

Thanks and Regards

Juzer Sadikot





Member (Account Deleted)
Raza (CA Final)


[ Scorecard : 3655]
Posted On 07 September 2009 at 15:35

LTCG on listed shares is already exemted so why two method for calculation




GPK - Dubai
Practicing Chartered Accountant


[ Scorecard : 1304]
Posted On 07 September 2009 at 15:48

Bro

 

LTCG on Listed Share sold in Recongnised Stock Exchange and STT is charged on sale of such shares are expemted u/s 10(38).

 

Now take an example of sale under buyback of listed Shares.

 

Thanks




CA. Megha Topiwala
Job


[ Scorecard : 1534]
Posted On 07 September 2009 at 20:05

Its again very simple...

Option 1 : With indexation - tax rate is 20%

Option 2 : Without Indexation - tax rate is 10%.. here directly 4m sale consideration deduct the cost of acquisition n the balance shall b LTCG which will b taxable @ 10%....

NOTE :

Here the option is given to the assesee to select the option whichever is benifcial to asseessee....




GPK - Dubai
Practicing Chartered Accountant


[ Scorecard : 1304]
Posted On 07 September 2009 at 23:49

Originally posted by :Megha Shah
" Its again very simple...
Option 1 : With indexation - tax rate is 20%
Option 2 : Without Indexation - tax rate is 10%.. here directly 4m sale consideration deduct the cost of acquisition n the balance shall b LTCG which will b taxable @ 10%....
NOTE :
Here the option is given to the assesee to select the option whichever is benifcial to asseessee....
"


 

Friend,

 

Technically speaking no option, its always lower of following;

20% with Indexation or

10% with out Indexation

 

Correct me if I am wrong.

 

Thanks




Debashis Mandal
Business & Tax Consultancy


[ Scorecard : 308]
Posted On 08 September 2009 at 02:26

Dear Md. Raza,

your question was on unlisted securities, now total analysis became on listed securities.

way of without indexan shown by Megha Shah is just appropriate. First calculate capital consideration recd. less cost of acquisation without index benifit = LTCG

again Mr.Zazir what sais - minimum is also absolutely correct, but that is for LTCG on Listed Shares & Securities




Member (Account Deleted)
Raza (CA Final)


[ Scorecard : 3655]
Posted On 08 September 2009 at 09:36

Thanks for reply..............

While going through my note book I found that two option are available only in case of Listed shares which are sold without paying STT or sold through a stock exchange which are not recogniesd...............for unlisted shares only 1 option

Am I right?




Pammi Srivastav
Assistant Finance Officer


[ Scorecard : 84]
Posted On 08 September 2009 at 10:23

The unlisted shares capital gain is computed in the normal manner and indexation is available for the same. The Options r available only for listed shares and not unlisted shares. The period of holding for unlisted shares & debentures r same as for normal assets like house and other tangible assets. Now the answer of ur 2nd question, why two metheds of  calculation for the listed shares which r long term. Because the gain is taxable at 10% if computed without indexation and it will be taxable at 20% if computed with indexation. The exemption is available u/s 10(38) only if shares r sold though stock exchange and securities transaction tax is paid otherwise not exemption is available.  U r right.




GPK - Dubai
Practicing Chartered Accountant


[ Scorecard : 1304]
Posted On 08 September 2009 at 11:49

Dear Members,

 

For LTCG in case of Capital Asset being shares of listed Company (Listed Shares) the Assessee doesnt have any "option".

 

Its always lower of two (refer my previous post)

 

Further the use of word Option in computatation of Capital Gains on Listed Shares can create big drama/blunder.

 

Thanks



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