CBDT guides new rules on capital gains tax and STT

The Central Board of Direct Taxes (CBDT) has notified that a list of equity share sale transactions are to comply with the new Budget provision in paying long-term capital gains tax if securities transaction tax was not paid.

The new compliances also include purchase of shares of a listed company that are not frequently traded through preferential issue; in case if the transaction for purchase of listed equity shares in a company is not entered through a recognised stock exchange; and in cases where acquisition of shares of a company during the period it was delisted from recognised stock exchanges.

CBDT has now issued a draft notification to this end and has sought stakeholder comments by April 11 to finalise the proposal.

The Finance Act, 2017, amended the provisions of Section 10 (38) of the Income-Tax Act to provide exemption from long-term capital gains tax for income from transfer of equity share acquired on or after October 1, 2004, if the transaction had been charged for STT.

All stock market transactions must pay STT in the range of 0.017 per cent to 0.125 per cent. The restriction was expected to curb tax evasion by showing them as sham transactions in stock markets.