Capital gains on shares held in demat form

Tax queries 1117 views 2 replies

Dear Freinds,

as per the relevant provisions of Income TAx, it is clear that FIFO method is used to determine the period of holding in case of shares held in Dematerialised form. Also when shares are purchased and sold after taking delivery of the same, the profit/ loss arising therefrom should be treated as Capital Gains/ Loss. Speculation Profit/ Loss will arise only if one makes an intra-day transaction, i.e. buying & selling of securities without actually taking delivery of the same. In the light of the above i have a few questions, if u can help me on the same..

I have 2 Demat Accounts Account registered with 2 different stock brokers (Say A & B) . in the Demat Account with A, i have 100 Equity shares of Co. X. (listed Co. subjected to STT).

My Question is: If i sell 100 Equity shares of X through Broker A, & buy 100 shares of X from Broker B on the same day, then am i subjected to tax on a  specuative transaction or am i subjected to Capital Gains TAx on the amount of diffrence between the sale price & purchase price.?

Please guide and give ur views..

Replies (2)

Delivery of Shares is crux. See following paragraph.

Section 43(5) in The Income- Tax Act, 1995
(5) 1[ " speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips: Provided that for the purposes of this clause-
(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or
(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or
(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; shall not be deemed to be a speculative transaction;
 
So, in your case, it seems that, you are taking delivery of shares & when selling, giving delivery of shares. So, it will not be a speculation.

 

I dont think this would be counted as a speculative transaction as you are giving delivery...

 

PS: If you buy and sell through the same broker, you wont be charged Delivery Charges. But if you do this through different brokers and settle the transaction through delivery, you would be required to pay Delivery Charges.

 

The above scenario looks like a hypothetical scenario and not a practical one..

 


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