The Hindu Business Line : Date clause binds rebate to share sale

I purchased shares of some companies through a sub-broker. However no Securities Transaction Tax (STT) was paid at the time of purchase. I held these shares for more than 12 months in my demat account and then sold them. I paid securities transaction tax at the time of selling these shares.

Am I eligible for claiming exemption in respect of the long-term capital gains earned through the sale? – Mshaji

The gain will be exempt, as you sold the shares after holding them for over 12 months through a recognised stock exchange where Securities Transaction Tax was charged during sale. This exemption will be available under section 10(38) of the Act.

Section 10(38) imposes two conditions for claiming exemption: (a) The sale of equity share or units is entered into after the date on which the STT can be levied, and (b) such transactions are chargeable to STT.

The section requires that the transaction of sale must have been entered into after the date on which the Securities Transaction Tax can be levied and where such transaction (the transaction of sale) is chargeable to STT.

The fact that the transaction of purchase was not subject to Securities Transaction Tax will not affect the claim for exemption u/s 10(38) and therefore you will be eligible for exemption.

I sold my agricultural property in November 2008.

Though the registered amount of the property is Rs 1,50,000, I had received Rs 8,50,000 towards the sale. The purchaser had given the entire sum through a demand draft from his savings bank account.

Am I eligible for reinvestment of the total amount or should I invest the sale proceeds in a capital gains account, or should I pay 20 per cent tax on the long-term capital gains? – Dinesh

The property has been registered for Rs 1.50 lakh while it appears that the consideration for the sale is Rs 8.50 lakh. You will be entitled to claim exemption on the entire consideration provided you can prove, when called upon to, that the consideration for the sale was Rs 8.50 lakh.

You may, however, note that agricultural land situated beyond the specified area is not a capital asset. If the land falls within this ambit, exemption can be claimed, notwithstanding the fact of reinvestment as the transaction itself would not attract capital gains tax.

The investment in capital gains account scheme would be required if the gain is chargeable to tax and if the reinvestment for the purpose of claiming exemption could not be done before the due date for filing the return of income.

I have earned a long-term capital gain of Rs 1.50 lakh through buy-back of shares during 2008-09. No securities transaction tax was paid at the time of the buy-back and hence tax can be charged at the concessional rate of 10 per cent on the long-term capital gains calculated without the benefit of indexation.

I have brought forward short-term capital loss of Rs 1.50 lakh. I have been advised that the brought forward short-term capital loss can be set off against the long-term capital gains that I have earned through the buy-back. Under what section of the Income-Tax Act is such a set off possible? – Vijay Kumar

You are right in your understanding that a brought forward loss under the head capital gains from the sale of a short term capital asset can be set off against gain being long term capital gains of the current year.

You may note that Section 74(1)(a) provides that if the brought forward loss relates to a short-term capital asset, it can be set off against income under the head capital gains in a subsequent year.

There being no prohibition on its set off against long-term or short-term capital gains, the same can be set off against long-term capital gains of the current year.

In contradistinction to section 74(1)(a) you may note that brought forward long-term capital loss can only be set off against long-term capital gain of a subsequent year, as provided for in section 74(1)(b) of the Income Tax Act.

I want to sell a house property purchased by me seven years ago and distribute the proceeds among my children. Would this process attract capital gains tax in my hands or can it be claimed as an exemption?

Can I set off the long-term capital loss from sale of shares against the long-term capital gains from sale of the house property? – Chandrashekher

The transaction of sale of the house property will be chargeable to tax under the head capital gains even though you may have distributed the entire proceeds from the sale to your children. Long-term capital loss from sale of shares can be set off against long-term capital gains from sale of house property.

Mail your queries to

taxtalk@thehindu.co.in

or by post to ‘Tax Talk’, Business Line, Kasturi Buildings,

859, Anna Salai, Chennai-600002

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