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long term capital gain

Started by scaa, October 27, 2009, 03:09:22 PM

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Under section 10(38) LT capital gains are exempted from taxation wef 1.10.2004 if Securities Transaction tax is paid. Does this exemption hold good for shares purchased before that date or only on shares purchased on or after 1.10.2004 ?


If the shares are sold after the date specified then the person is entitled for claiming exemption available u/s 10(38). It is not necessary that the shares should be purchased after the date specified.


Further it should be held as investment. If it is treated as stock in trade  by Assessing Officer , then exemption would not be available because exemption is available to a long term capital asset.

(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 :

                        70 [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 71[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;]


Sec 10(38) only says that the income should arise after the sp date.
Income arises on transfer and not on acquisition.
So the date of acquisition is immaterial.