S. Ramkumar

Reply

The first issue that needs to be addressed is whether the gain arising from the sale of shares carried on by you is to be treated as capital gains or business income.

Capital gains normally occurs when there is a sale or investment, while business income arises from the sale of assets held as stock-in-trade.

Whether a share, which is purchased, forms part of investment or stock-in-trade is essentially one that has to be decided based on the facts and circumstances of the case.

In any case, where there is the buying and selling of shares without taking delivery and where such transactions are voluminous, there can be little doubt that the gain or loss arising out of such transactions should not be taxed as capital gains but as business income.

The manner of funding and the frequency of transactions will also have an impact on arriving at the conclusion as to whether the gain is to be assessed as capital gain or business income.

In your case, in the first two instances, the gain should be treated as business income and charged to tax at the normal rates applicable to an individual. You can claim the STT paid on such transactions as a rebate against your tax on such business income.

Regarding the other instances, a decision will have to be arrived at based on the facts of the case.

If the gain is assessable as business income, the tax would be charged as stated above with the rebate being available in respect of the STT as indicated above.

If the gain is assessable as capital gains, the short-term capital gains will be taxed at 10 per cent (as increased by the appropriate surcharge and additional surcharge) while the long-term capital gains will be exempt from tax.

If the gain is assessable as capital gains, you cannot get a rebate in respect of the STT paid.

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