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Our Bureau The Central Board of Direct Taxes (CBDT) has embarked on wider consultations on a Union Budget move relating to a 10 per cent long-term capital gains (LTCG) tax on equity shares and units of equity-oriented mutual funds.
It has now come out with a draft list of share acquisition transactions where securities transaction tax (STT) payment wasn’t required, but which will still qualify for 10 per cent LTCG tax under Section 112-A of the Income Tax Act.
It may be recalled that Finance Minister Arun Jaitley had, in this year’s Budget, imposed 10 per cent LTCG tax on equity shares and units of equity-oriented mutual funds or units of a business trust. However, this Budget proposal came with a rider that STT should have been paid on acquisition and transfer of such capital asset.
Addressing genuine cases
It was also then specified that the Centre will come out with situations of genuine cases where STT could not have been paid and yet the 10 per cent LTCG tax will apply.
Towards this end, the CBDT has now come out with a draft notification and invited comments/suggestions on the situations where STT could not have been paid, but the 10 per cent LTCG tax would apply.
Stakeholders have been asked to submit their comments on the draft notification by April 30.
Experts’ take
Aseem Chawla, Partner, Phoenix Legal, a law firm, said that payment of STT at the time of acquiring shares is an important consideration in determining incidence of LTCG.
In recognition of genuine cases and bonafide instances where STT could not be paid — say, in a corporate reorganisation, the government, in a welcome move, has sought public consultation to identify such situations and provide their comments, Chawla said.
Garima Pande, Partner & Business Tax Services Leader, EY India, said, “Finance Act 2018 provided for long-term capital gains tax on transfer of specified securities only if STT has been paid on acquisition and transfer of such capital asset. There can be various genuine cases where STT could not have been paid. The move to seek comments/suggestions from industry is a welcome step to ensure wider coverage of such genuine cases.”
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