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Section 10(38) of Incometax Act

sekhar reddy (student) (41 Points)

29 December 2007

Hi friends! Advanced happy new year and Pongal to all. If we transfer the long term shares(Equity shares of listed company) during the financial year 07-08, and it is covered under securities transation tax and the same was deducted from the sale value of shares. Is this exempt or not? If not can we take Index or not?. These transaction was done through the Rocgnised Stock Exchange only. Pls send me as early as possible. My mail id is sekharreddy_ca @ yahoo.com, and sekharreddy ca @ rediffmail.com . The gap between the sekharreddy and ca in the above mail id is '_' only. ok bye all the best. bye bye

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Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 30 December 2007

Section 10(38) of the Income tax Act ,exempts following income: (38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund where— (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and (b) such transaction is chargeable to securities transaction tax under that Chapter : 44[Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB.] Explanation.—For the purposes of this clause, “equity oriented fund” means a fund— (i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 45[sixty-five] per cent of the total proceeds of such fund; and (ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) : Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;]

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astha (CA, CS) (85 Points)
Replied 31 December 2007

W.E.F Assesment Year 2000-2001, Long Term Capital Gain arising on sale of securities listed on Recognised stock Exchange, Unit of UTI, Mutual Fund specified u/s 10(23D) or Zero Coupon Bonds shall be minimum of the following: a) Tax @ 20% after providing indexation OR b) Tax @ 10% without indexation However as per Sec 10(38) L.T.C.G arising on sale of listed equity shares or units of equity oriented fund shall be exempt if: a) such sale takes place after 1.10.2004 b) Sale takes place through recognised stock exchange c) Such transaction is chargeable to S.T.T Thus Sec 10(38) provides greater benefit in case of L.T.C.G.

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