March 3, 2016

CBDT spares investors from capital gains disputes

As per the new circular, the assessee can opt to treat income earned from sale of shares or securities as capital gains or business income and the assessment officer cannot question it.

The Ministry of Finance has issued a circular (No6/2016) for providing clarification on taxability on income earned from sale of shares and other securities and whether to treat it as capital gains or business income.

The circular gives a choice to the assessee to define the income earned from share or securities sale as capital gains or business income. It says, assessing officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as capital gain or business income, shall take into account the following...

a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income,

b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/ contrary stand in this regard in subsequent years;

c) In all other cases, the nature of transaction (i.e. whether the same is in the nature of capital gain or business income) shall continue to be decided keeping in view the aforesaid Circulars issued by the Central Board of Direct Taxes (CBDT).

Read more at http://www.moneylife.in/article/tax-on-gains-from-share-sales-clarified-will-help-taxpayers/45689.html

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