Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: articles on VAT and GST in India :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: TDS :: VAT RATES :: list of goods taxed at 4% :: empanelment :: ACCOUNTING STANDARD :: due date for vat payment :: VAT Audit
 
 
« News Headlines »
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice
 Accepting payment under IDS 2016
 New disclosure scheme could see 50% tax and 4-year limit on cash use for unaccounted deposits
 Pay 50% tax on unaccounted deposits, or 85% if caught, says Modi government
 Deadline to pay property tax in old currency extended
 Cabinet clears amendments to Income Tax Act

No need to pay extra tax on stock deals
January, 10th 2007

A tricky issue that all local stock market investors will have to grapple with has resurfaced. It relates to the tax they will have to fork out on the money made from stocks. While the matter is yet to be resolved, theres some good news for investors.

According to a recent order by the Income-Tax Appellate Tribunal (ITAT), short-term capital gains, even if generated through a large number of transactions, would attract 10% tax. In other words, the money an investor makes by exiting a stock within a year of purchase will be treated as capital gains and, not as business income which attract a 30% tax.

Even though the government and tax authorities have set certain parameters to differentiate between capital gains and business income, investors felt the norms lack clarity and lend themselves to different interpretations by assessing officers.

However, the last word on this is yet to be said since ITAT is a quasi-judicial body and its decision can be challenged in a High Court. Still, the ITAT order assumes significance as the I-T department treats short-term capital gains as business income if such gains are generated through a large number of transactions (i.e. sale and purchase of shares).

If an investor has carried out a large number of transactions in securities, the department treats him as a dealer in shares and deny him the lower rate of tax applicable on capital gains. In most cases the I-T department based its argument on the volume of transactions to classify an investor as a dealer in shares.

The recent ITAT order, given on an appeal filed by Jignesh Shah on behalf of Janak Rangwalla, a businessman, will set at rest, at least for the time being, the ongoing tussle between the I-T department and taxpayers on the tax applicable on gains from frequent share transactions.

The ITAT bench, comprising accounting member Pramod Kumar and Judicial Member Sushma Chowla, held that volume of transactions should not be the basis of considering such income as business income. In this case Mr Rangwalla had earned short-term capital gains amounting to Rs 1.47 crore, which was claimed to be adjusted against long-term capital loss.

The assessee has also declared income from speculative gains, on account of sale and purchase of shares without the delivery of shares. The assessee had also claimed long-term capital loss of over Rs 1.02 crore. Similar transactions, carried out by the assessee in preceding years, were held as capital gains. 
 
The department declined to accept the income from investment as short-term capital gains, observing that given the frequency of transactions in shares, the assessee be treated as a dealer in shares and not an investor. Therefore, the department treated it as regular business income, which attracts tax at the rate of 30%.

The ITAT held that there is no basis for treating the assessee as a trader in shares when his intention was to hold the shares in Indian companies as an investment and not as a stock in trade. The magnitude of transactions does not change the nature of transactions, the ITAT observed.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Integrated Software Solutions Integrated Software Development Integrated Software Services Integrated Software Solutions India Integrated Softw

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions