The government may soon make the filing of annual information return (AIR) compulsory not just for buying but also for selling of shares beyond a particular value. At present, filing of AIR is a must for a company when an individual applies for shares worth Rs 1 lakh and beyond, whereas there is no such requirement in case of selling.
The government may maintain Rs 1 lakh as the threshold limit for filing AIR in case of selling of shares as well. However, the limit in case of selling could also be fixed between Rs 1.5 lakh to Rs 2 lakh.
The new initiative, aimed at bringing in more transparency to the system, may find a place in the forthcoming Budget. It may also be separately issued just after the Budget, sources in the finance ministry said. Its being considered for the coming Budget.
The AIR for all security transactions will finally be made mandatory irrespective of whether it is announced in the Budget itself, or a few months later. A few more items could be added to the present list of seven items for which the AIR is made compulsory, sources in the ministry pointed out.
At present, individuals voluntarily disclose selling of shares and pay 10% short-term capital gains tax if profits are booked within one year. Currently, the filing of AIR is needed on seven high value financial transactions including cash deposits aggregating to Rs 10 lakh, credit card spend of over Rs 2 lakh, investment in mutual fund above Rs 2 lakh, acquiring bonds or debentures for Rs 5 lakh or above, applying for shares over Rs 1 lakh and investment of RBI bonds of Rs 5 lakh or above.
Nikhil Bhatia, partner in KPMG, said that the government must ensure that the filing should be made as simple as possible. Such new initiatives will, no doubt, bring in more transparency to the system, but the procedure should be made simple. It should not have an additional burden for the companies who need to file those AIRs.
Though finance minister P Chidambaram left the capital market untouched during the last Budget, he proposed to hike the securities transaction tax (STT) by 25% from 0.1% to 0.125% in the Union Finance Bill 2006-07, announced in February, 2006.
In fact, the STT was introduced in the 2004-05 Union Budget and is applicable in case of purchase and sale of securities in stock market.