Accounting for Lending & Borrowing of Securities

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Is there any guidance note issued by the ICAI for accounting for lending & borrowing of securities. If not then how to account for it?

Eg: I borrow some shares from a person on 20.03.2009 and sell the same on 21.03.2009. On 31.03 i have negative stock. What entries need to be passed for the purchase, sale and the valuation of closing stock should be done on what basis.

Replies (4)
Kindly refer below mentioned details:- •The Central Board of Direct Taxes (CBDT) has exempted stock lending/borrowing from the purview of securities transaction tax (STT) and capital gains tax •Borrowers will make some payment to lenders of shares by way of interest or fees that will be income in the hands of the lender •While selling the shares, borrower will not be paying any tax as the gain from such sale is not known However, the Central Board of Direct Taxes (CBDT) has exempted stock lending/borrowing from the purview of securities transaction tax (STT) and capital gains tax. CBDT has issued a circular in this regard to the income tax field formations. Borrowers will make some payment to lenders of shares by way of interest or fees that will be income in the hands of the lender. “It will be treated as income from business of lending/borrowing or income from other sources of income and will be taxable at applicable rates,” said a finance ministry official. While selling the shares, borrower will not be paying any tax as the gain from such sale is not known. But when a borrower repurchases shares to return to the lender, the margin between sale and re-purchase will be treated as profit from business or capital gains depending on the tax treatment of shares as per CBDT rules, the official said. If the shares transacted are treated as capital assets, then short term capital gains tax will be levied at the rate of 10 per cent. If they are treated as trading asset, the tax rate could be as high as 30 per cent. Another big issue likely to come up is - whether stock lending and borrowing will be treated as a speculative activity. According to sources, the income tax assessing officers can treat the stock lending/borrowing as speculative transaction. That means, losses on speculative business will not be allowed to be set off against income from normal business for claiming tax refund or reducing tax liability. According to the government official, there were two issues before the CBDT - (i) whether lending/borrowing of securities under securities lending and borrowing scheme will amount to “transfer” under clause 47 of the Income Tax Act, in the hands of lender? (ii) Whether lending/borrowing of securities will be subjected to securities transaction tax? Both the issues have been taken care of in the circular.

is gst applicable on lending fee received by lender in security lending scheme?

No

HOW SHALL I DO ACCOUNTING TREATMENT SLBM TRANSACTION. PLEASE  LET ME KNOW  

& HOW TO TO TAKE PURCHASE VALUE OF BORROW STOCK ON MARCH ENDING 


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