SCRIPS BOUGHT AFTER OCT 1, 2004 PEs, Esops Face STT Googly on Unlisted Shares
10% long-term cap gains tax if STT not paid while buying stock; rev secy says genuine investors needn’t fear
Mumbai: Private equity funds and holders of stock options were thrown into confusion by a Budget provision aimed at plugging a black money loophole, fearing that it could land them with a hefty tax bill. Those who acquired shares in unlisted companies after October 1, 2004, will have to pay 10% long
All In A Day term capital gains tax if they hadn’t paid securities transaction tax (STT) at the time of purchase. Currently, income arising from the transfer of long-term capital assets such as stocks is exempted from tax if the sale took place on or after October 1, 2004. STT, which was introduced that year, typically applies to listed stocks.
“It has been noticed that exemption provided under Section 10(38) is being misused by certain persons for declaring their unaccounted income as exempt long-term capital gains by entering into sham transactions,” according to the Budget. “With a view to prevent this abuse, it is proposed to amend Section 10(38).”
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