Long term capital exemption may go ...

The Central Board of Direct Taxes (CBDT) is considering a proposal to restrict the exemption on long-term capital gains only to companies constituting the BSE-500 index.

At present, the exemption under Section 10 (38) is allowed on transactions of shares of all companies. However, the department observed in its surveys that the provision was misused to introduce unaccounted income into the system.

This is one of the several measures mulled by the department at its strategy meeting held with the government last month to boost collections for fiscal 2007-08 by widening and deepening the tax base.

Under Section 10 (38), income earned from sale of equity shares of any companies/units of an equity-oriented fund is exempt from tax if the transaction has taken after October 2004, and the securities transaction tax has been paid.
In this context, an asset is defined as long term if it is held for more than a year.

Another measure under consideration is taxing the income offered under “income from other sources” at the maximum marginal rate of tax if the source is not disclosed or the source does not sound convincing to the tax authorities.

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