Tax Exemption for Acquisition of Non-STT Shares: CBDT’s Draft Notification

CBDT’s Draft Notification u/s 10(38) Tax Exemption for Acquisition of Non-STT shares in certain cases

CBDT has issued draft Notification in line with amended provisions u/s 10(38) in respect of tax exemption for non-STT shares acquired in IPO, FPO, bonus or rights issue by a listed company, acquisition by non-resident in accordance with FDI policy of the Govt., etc., as under:

CBDT Press Release dt. 3 Apr. 2017 reg. Draft Notification

In order to curb the practice of declaring unaccounted income as exempt long term capital gain by entering into sham transactions, the Finance Act, 2017 amended the provisions of section 10(38) of the Income-tax Act, 1961. Prior to such amendment, Section 10(38) provided that the income arising by way of a transfer of long term capital asset, being equity share in a company, shall be exempt from tax if such transfer is undertaken after 1 Oct. 2004, subject to charge of Securities Transaction Tax (STT) under Chapter VII of the Finance (No. 2) Act, 2004.

However, amended Section provide for exemption not only for income arising on transfer of equity share acquired on or after 1 Oct. 2004 subject to charge of STT but also for genuine cases where the STT could not have been paid like acquisition of share in IPO, FPO, bonus or rights issue by a listed company, acquisition by non-resident in accordance with FDI policy of the Government, etc., Further, amended provisions stipulates that the Central Government shall notify the cases of acquisition for which the condition of chargeability to STT shall not apply.

Therefore, the CBDT has issued draft/ proposed notification u/s 10(38) to provide that the condition of chargeability to STT shall not apply to all transactions of acquisitions of equity shares entered into on or after the 1 Oct. 2004 other than the specified transactions. The stakeholders have been requested to submit their comments/ suggestions thereon by 11 Apr. 2017 at the email address dirtpl2@nic.in

CBDT’s Proposed/ Draft Notification u/s 10(38) of Income Tax Act for comments

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