Accounting & Taxation Issues relating to Capital Market Transactions

(c )PROFIT OR GAINS ON TRANSFER MADE BY THE
DEPOSITOR U/S 45(2A).
‣ The depository is not assessed to capital gain although it is deemed
to be the registered owner of securities by virtue of section 10(1 ) of
the Depositories Act, 1996.
‣ Under demat determination of the period of holding of securities and
their cost of acquisition is made on the basis of FIFO method
(circular no. 768 dated 24 th June, 1998).
(D) SHORT/LONG TERM CAPITAL ASSET KU/S 2 (42A)/2(29a).
‣ For this purpose an asset being shares of a company or units of a
mutual fund or any other security listed in a recognized stock
exchange or a zero coupon bond held for not more than 12 months is
treated as short term capital asset otherwise it is treated as long term
capital asset.
‣ For example: shares purchased on 27.3.2008 and sold on 27.3.2009
are to be treated as short term capital asset. If above shares are sold
on 28.3.2009 then they are to be treated as long term capital asset.
Date of sale is not to be included while calculating period of holding.
(E) EXEMPTION TO LONG TERM CAPITAL GAIN U/S 10(38).
‣ Exemption for equity shares in a company or units of a equity oriented
fund.
‣ Sale transaction should take place in a recognized stock exchange.
‣ STT should be paid at the time of sale.
‣ If STT not paid, normal tax rates regime shall apply.
‣ Exemption is available from assessment year 2005-06. In case of
company LTCG is to be considered as part of Book Project for MAT
purposes w.e.f. Assessment year 2007-08 – Sec proviso to Sec.10(38).