Tax treatment for long term capital gains on equity shares

Tax queries 203 views 6 replies

Hemal Dedhia

Internal Audit

21 Points Joined November 2008

I have a query regarding Capital gains on equity shares. Request members to give me their opinions on the tax treatment.

Equity shares of a listed company have been purchased in the year 1992. On these shares, bonus issue was received in the year 2000. Rights issue was also issued and taken by the investor. When the original investment and the bonus and rights were taken was before 2004 (i.e. when STT was implemented).

Now in the year 2016 - 17, the shares have been sold and STT was paid.

My query was that the Long term capital gains which arise from sale of the equity shares (original and bonus and rights) on which STT has been paid... Will the LTCG be exempt from tax as per Section 10 (38)?

I have read some articles but not been able to arrive at a conclusion for the same. Awaiting your responses Thanks in advance.

Replies (6)

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210518 Points Joined July 2016

Yes, the LTCG will be exempt.

The article were related to AY 2018-19 and onwards..

Abhishek Pithisaria

Student

150 Points Joined May 2014

What has changed from AY 2018-19 Dhiraj Sir??
If someone has shares (including bonus and right) purchased before 2004 (as no STT that time) and sale in the year 2017-18 after paying STT then will it be LTCG or exempt.
As per my understanding, if any person has purchased shares after 2004 and not paid STT on purchase then it will be liable to LTCG even if sold at STT. Please enlighten..

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210518 Points Joined July 2016

The query is related to FY 2016-17, and the reply is related to confusion which the articles created in the mind of querist.

And what you say is also correct...... but not w.r.t different year/s for the amendment and query.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

210518 Points Joined July 2016

The Finance Act, 2017 amended the provisions of section 10 (38) of the Act to provide that exemption under this section for income arising on transfer of equity share acquired on or after 1st day of October, 2004 shall be available only if the acquisition of share is chargeable to STT. However, to protect the exemption for genuine cases where the STT could not have been paid, it was also provided that the Central government shall notify the acquisition for which the condition of chargeability to STT shall not apply.

Draft notification attached...

Abhishek Pithisaria

Student

150 Points Joined May 2014

What I have said is also correct for subsequent financial years also Sir? Is that what u mean. Because seriously some articles are creating unnecessary confusion among the students as well who are going thru it.