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Can I avail tax rebate under Section 87A for long term capital gains on listed shares?


Query: I’m a resident of India. I had acquired some shares greater than 20-25 years again when there was no Securities Transaction Tax (STT). I’ve offered these shares with a revenue of Rs. 1,40,000/- on which STT has been paid. How the long run capital positive factors can be computed in respect of those fairness shares? Since my complete taxable revenue together with the above long run capital positive factors after the preliminary exemption is lower than 5 lakhs so I really feel I should not have to pay any tax in view of the rebate beneath Part 87A. Please affirm.

Reply: Fairness shares of firms listed on the Indian Inventory trade are handled as long run capital property if the identical is offered/transferred after having held for multiple yr. Any earnings made on switch of such long run capital asset is named long run capital positive factors (LTCG). Such LTCG is taxed at a flat fee of 10% after an preliminary exemption of 1 lakh yearly supplied securities transaction tax (STT) has been paid in respect of buy and sale of such shares. Whereas computing the long run capital achieve in respect of listed fairness shares, you aren’t entitled to take the good thing about the Price Inflation Index. Because the shares have been acquired earlier than STT was launched and since you’ve gotten already paid STT on the time of sale of those shares, you might be coated beneath Part 112A. In respect of shares that have been acquired earlier than 31 st January 2018, the market worth of such shares on 31 st January 2018 shall be taken as the price of such shares and thus any revenue accrued until 31 st January 2018 on such shares comes tax-free in your palms.

So far as your query of rebate beneath Part 87A is anxious, you might be eligible for a rebate beneath Part 87A since your complete taxable revenue is lower than the edge restrict of 5 lakhs. Nonetheless, you’ll have to pay tax on the fee of 10% and fewer on 40,000 (steadiness LTCG after preliminary exemption of 1 lakh).

Balwant Jain is a tax and funding skilled and will be reached at jainbalwant@gmail.com and @jainbalwant on Twitter.

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