Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
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) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: VAT RATES :: due date for vat payment :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: form 3cd :: ACCOUNTING STANDARDS :: VAT Audit :: TDS :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: articles on VAT and GST in India
Direct Tax »
 CBDT to prescribe deadline for MNC units to file details of operations in certain cases
 Filing your return may not mean the end of tax issues
 Filing tax return before March 31? Here is what you should do and what not
 CBDT invites suggestions to draft new Direct Tax Law
 Deadline For Income Tax Returns Filing Only 12 Days Away. 10 Points
 Income Tax: E-assessment ensures greater efficiency in the taxation system
 10 Points Deadline For Income Tax Returns Filing Only 2 Weeks Away.
 Income tax returns (ITR) filing: A step by step guide to check your ITR status online and offline
 How to save tax; amazing tips to make your money stay in your wallet Income tax returns (ITR) filing
 Want to save tax? Here are the best options
 Suggestion For Option To Assessee For Higher And Lower TDS/TCS For Optimization Of Tax Collection And Refunds

Changes in capital gains taxation
June, 11th 2011

There are a number of changes proposed in the Direct Taxes Code Bill, 2010 (the DTC) on capital gains taxation. Foreign Institutional Investors (FIIs) will not be subjected to sporadic questioning as to the true nature of their activities investment or business. That they are in business of buying and selling shares has been the contention of the tax administration.

The DTC seeks to declare that their activities in India are investments, and not business. In the event, what they make by way of profits would be capital gains, and not business income. In the light of this clarification, FIIs can continue to route their investments into India via Mauritius assuming the government does not go through with its threat to review the invidious treaty with that country that bails out capital gains earned in India by a resident of Mauritius from the clutches of Indian tax authorities.

Ironically and curiously the same amendment is not proposed with reference to other institutional investors, particularly those rooted in India.

Grey areas on shares
The extant law confers a straight exemption vide section 10(38) to long term capital gains from shares or units of equity-oriented funds from bourses subject to payment of Securities Transactions Tax (STT). The DTC proposes to continue with the same tax treatment, not vide an exemption but through a deduction. It declares that 100 per cent of such long-term gains would be deductible from such gains, thus effectively conferring a 100 per cent exemption as hitherto. So far so good. But what happens when such computations give rise to a loss. It is a settled legal position that when an income is exempted, any negative income of that variety cannot stick out demanding its set-off. In other words, in such an event, any loss would be treated as non est.

What would happen if there is a loss under the new regime? The DTC has the following to say on this:

if the income computed after giving effect to sub-section (1) is a negative income, hundred per cent of the income so arrived at shall be reduced from such income

If this means the negative income from the transaction would be squared out so as to prevent the loss from standing out demanding set-off, it is all right. The subsequent discussion on short-term capital gains from bourses reinforces this correct and commonsensical interpretation but not quite so as to eschew every vestige of doubt.

In case of short-term gains, 50 per cent would be deducted, leaving the remaining 50 per cent to be taxed. But doubts are once again raised by the language of the provision dealing with short-term losses which are reproduced below: If the income computed after giving effect to sub-section (1) is a negative income, fifty per cent of the income so arrived at shall be reduced from such income.

There is need for a greater clarity on the issue.

Capital losses
As it is, long term capital losses can be set off only against long term capital gains of the same year or of the next eight years whereas short-term capital losses can be set off against both short-term and long-term gains during the same period. But in either case capital loss, short or long, is not allowed to abate against income from other heads of income now or in future.

These taboos are going to vanish in the new regime. First, the distinction between short-term and long term losses would go. Secondly, capital losses can be set off against any income from ordinary sources namely salary, business, house property and other sources now or in future without any time restriction.

While the DTC is liberal to treatment of losses of all hues by removing the time bar of eight years when it came to the maximum period one could carry forward the losses, those nursing capital losses have a special reason to celebrate and would breathe a lot easier.

(The author is a Delhi-based chartered accountant.)

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Company Overview

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