T. Banusekar

I purchased shares of some companies through a sub-broker. However no
Securities Transaction Tax (STT) was paid at the time of purchase. I
held these shares for more than 12 months in my demat account and then
sold them. I paid securities transaction tax at the time of selling
these shares.

Am I eligible for claiming exemption in respect of the long-term
capital gains earned through the sale? – Mshaji

The gain will be exempt, as you sold the shares after holding them for
over 12 months through a recognised stock exchange where Securities
Transaction Tax was charged during sale. This exemption will be
available under section 10(38) of the Act.

Section 10(38) imposes two conditions for claiming exemption: (a) The
sale of equity share or units is entered into after the date on which
the STT can be levied, and (b) such transactions are chargeable to
STT.

The section requires that the transaction of sale must have been
entered into after the date on which the Securities Transaction Tax
can be levied and where such transaction (the transaction of sale) is
chargeable to STT.

The fact that the transaction of purchase was not subject to
Securities Transaction Tax will not affect the claim for exemption u/s
10(38) and therefore you will be eligible for exemption.

I sold my agricultural property in November 2008.

Though the registered amount of the property is Rs 1,50,000, I had
received Rs 8,50,000 towards the sale. The purchaser had given the
entire sum through a demand draft from his savings bank account.

Am I eligible for reinvestment of the total amount or should I invest
the sale proceeds in a capital gains account, or should I pay 20 per
cent tax on the long-term capital gains? – Dinesh

The property has been registered for Rs 1.50 lakh while it appears
that the consideration for the sale is Rs 8.50 lakh. You will be
entitled to claim exemption on the entire consideration provided you
can prove, when called upon to, that the consideration for the sale
was Rs 8.50 lakh.

You may, however, note that agricultural land situated beyond the
specified area is not a capital asset. If the land falls within this
ambit, exemption can be claimed, notwithstanding the fact of
reinvestment as the transaction itself would not attract capital gains
tax.

The investment in capital gains account scheme would be required if
the gain is chargeable to tax and if the reinvestment for the purpose
of claiming exemption could not be done before the due date for filing
the return of income.

I have earned a long-term capital gain of Rs 1.50 lakh through
buy-back of shares during 2008-09. No securities transaction tax was
paid at the time of the buy-back and hence tax can be charged at the
concessional rate of 10 per cent on the long-term capital gains
calculated without the benefit of indexation.

I have brought forward short-term capital loss of Rs 1.50 lakh. I have
been advised that the brought forward short-term capital loss can be
set off against the long-term capital gains that I have earned through
the buy-back. Under what section of the Income-Tax Act is such a set
off possible? – Vijay Kumar

You are right in your understanding that a brought forward loss under
the head capital gains from the sale of a short term capital asset can
be set off against gain being long term capital gains of the current
year.

You may note that Section 74(1)(a) provides that if the brought
forward loss relates to a short-term capital asset, it can be set off
against income under the head capital gains in a subsequent year.

There being no prohibition on its set off against long-term or
short-term capital gains, the same can be set off against long-term
capital gains of the current year.

In contradistinction to section 74(1)(a) you may note that brought
forward long-term capital loss can only be set off against long-term
capital gain of a subsequent year, as provided for in section 74(1)(b)
of the Income Tax Act.

I want to sell a house property purchased by me seven years ago and
distribute the proceeds among my children. Would this process attract
capital gains tax in my hands or can it be claimed as an exemption?

Can I set off the long-term capital loss from sale of shares against
the long-term capital gains from sale of the house property? –
Chandrashekher

The transaction of sale of the house property will be chargeable to
tax under the head capital gains even though you may have distributed
the entire proceeds from the sale to your children. Long-term capital
loss from sale of shares can be set off against long-term capital
gains from sale of house property.

Mail your queries to

taxt...@thehindu.co.in

or by post to ‘Tax Talk’, Business Line, Kasturi Buildings,

859, Anna Salai, Chennai-600002

--
Since I cannot increase the content of life by increasing its
duration, I will increase it by increasing its intensity...Art, Music,
Poetry, and everything else that I do have this one
purpose---increasing the intensity of my consciousness and life.
                                   HOMI BHABHA (1934)