1. Preface
Definition of Capital Asset (CA)
Type of Capital Asset
Type of Capital Gain
How to calculated the period of Capital Asset
Concept of STT (Security Transaction Tax)
Accounting Aspect of different transaction
Treatment in respect of Speculative Transaction
Valuation method
Tax Treatment of different type of Capital Gain in respect of share
& MF
Tax Planning
4/21/2013 1
3. Section 2(14) Capital Asset means
property of any kind held by the
assessee, whether or not connected
with his business or profession, but
doesn’t include
• stock of business
•Personal effects excluding certain
exceptions
•Rural agricultural land
4/21/2013 3
4. Capital Asset can be divided into two parts on
the basis of holding period of CA.
Holding period refers to the period in which
CA is held by the assessee i.e. retention period
of the asset by the assessee.
Capital asset can be divided into two parts :- (1)
STCA (Short term capital asset)
(2) LTCA (Long term capital asset)
4/21/2013 4
5. In India STT was introduced by finance act,
2004, which was effective from 1.10.2004
Main purpose behind introducing STT was
attracting inflows in Indian market & holding
investment through tax benefit in matter of
capital gain.
At present time STT gives great revenue to CG
At present time STT becomes hurdles in
investment but government will not interested
in elimination or reducing this tax.
4/21/2013 5
6. If shares or Units of MF hold more than 12
Months and sold through RSE then it is totally
exempted otherwise it’s taxable @20% .
If shares or units sold within 12 months and
sold through RSE then it’s taxable @15%
otherwise it’s taxable at normal rate.
Accounting aspect as per Normal Accounting
& Income tax.
4/21/2013 6
7. First and most important factor in the above
matter is that whether it’s investment activity
or business activity.
Turnover for business activity is GROSS sales
value
Treatment of STT in the case of investment or
business activity
4/21/2013 7
8. Tenure of activity
Object of purchases and sales
Object of investment
Quantity of transaction
Continuity of transaction
Capital investment :- self/ borrowed
Types of shares
Time involvement
Stock of shares
Holding period of stock
4/21/2013 8
9. Speculative transaction means a transaction in which a contract for the
purchase of sale of any commodity, including stocks & share, is
periodically or ultimately settled, otherwise than by the actual delivery
or transfer of the commodity or scripts.
Eligible Transaction is excluded.
Conditions of eligible transaction.
Babulal Enterprises v ACIT (ITA631/MUM/1996)
Without delivery based transaction and turnover calculation has been
discussed.
4/21/2013 9
10. Intraday Transaction means those transaction in
which no delivery of share is taken in investor’s
beneficiary account i.e. purchase and sales are
taken place in same day and in same market.
This is SPECULATIVE activity
Turnover is the difference between sale and
purchase value whether positive or negative.
Due to business activity u will be able to claim all
the expenses which will incurred for this activity
Its required lot of paper work and their retention
for long time (at least 6 yrs.)
4/21/2013 10
11. Meaning of Future & Option
Type
This is purely business activity
Calculation of turnover in respect of future &
option
Treatment of Premium amount & Roll over
amount.
4/21/2013 11
12. Section 111A & 112
Proviso U/S 112(1) is exercised or not
Section 10(38)
Section 94(7) & 94(8)
Section 80C
Section 234B & 234C
Section 56(vii)(.c)
Set off & Carry Forward
4/21/2013 12
13. For the purpose of calculating CG, Income tax
Dept allows only FIFO (First in first out)
method.
Treatment when shares held in Physical Form
Treatment when physical shares converted into
demat from.
Treatment when you have more than one a/c
in same DP.
4/21/2013 13
14. In case of individual :- As a gift, set off STCL
with STCG/LTCG, House property loss can be
set off, investment planning in case of HNI
(they interested in tax free income), off market
share transaction.
In case of HUF :- As a gift in both direction.
4/21/2013 14
