Question And Answer
Subject: When an assessee buys and sells unlisted shares for trading if it exceed the prescribed limit is he liable to deduct TCS ?
Querist: Jaysukh
Answered by:
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Date: May 18, 2021
Query asked by Jaysukh

I am buying and selling unlisted equity shares for more than Five years.

In view of circular no. F. No. 225/12/2016/ITA.II dated 2nd May, 2016, I am treating the gains/losses thereon as Capital Gains.

I have been consistently been following this system of treating trades in Unlisted shares as Investments and Capital Gains.

For year ended 31st March, 2021 my sale of unlisted shares exceeded say 12 Crores.

My business turnover from FNO in Listed shares is less than say 3 Crores.

As I showing trades in Equity Shares as Capital Gains my turnover from Business is less than 3 Crores.

Am I liable to deduct TDS or TCS on purchase and sale of unlisted shares? If YES, then WHY?

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The Finance Act 2020 expanded the scope of section 206C of the Income-Tax Act, 1961 (Act) by introducing the provision for collection of tax on sale of goods, with effect from 1 October 2020.

The term ‘Goods’ is not defined under section 206C or any other provisions of the Act and therefore, an issue arises on applicability of TCS to securities. CBDT vide its circular dated 29 September 2020 sought to address this issue by providing a guideline as per which TCS would not be applicable on transaction in securities carried out through stock exchanges. Therefore, unlisted shares continue to be within the purview of the law.

Therefore, if the threshold for seller and buyer, and other criteria are met, the transaction shall attract TCS.

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