Our Bureau

New Delhi, June 28

Long term investments in the stock market whereby shares are held for 12 months or more should be held as investment and not stock-in-trade and gains there from treated as long-term capital gains, suggests industry chamber FICCI.

On the Central Board of Direct Taxes' proposal to issue supplementary guidelines on differentiating between shares held as stock in trade and shares held as investment, the chamber says the existing guidelines are adequate and clear. However, if revised guidelines are necessary to be issued, a broad dividing line between the two should be laid down.

In the case of shares held as investment for more than 100 days, there should be a presumption that these are held as investment only. Similarly, in the case of shares held for less than 100 days, there should be a presumption that these are held as stock-in-trade, according to the chamber.

In a note submitted to the Finance Ministry, the chamber suggests having a threshold limit for investment income from share transactions in a year to avoid any questionings within that limit for treatment as short-term capital gains.The revised instructions should also mention that they do not refer to foreign institutional investors so that it is not left to the subjectivity of assessing officers, according to the chamber.The Government may constitute a smaller group to critically analyse various dimensions of this contentious aspect, according to the chamber.

(This article was published in the Business Line print edition dated June 29, 2006)
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