Budget 2016: Existing provisions of clause (c) of sub-section (1) of section 112 provide tax rate of ten per cent for long-term capital gain arising from transfer of securities, whether listed or unlisted. The expression “securities” for the purpose of the said provision has the same meaning as in clause (h) of section 2 of the Securities Contracts (Regulations) Act, 1956 (32 of 1 956)(‘SCRA’). A view has been taken by the courts that shares of a private company are not “securities”.

With a view to clarify the position so far as taxability is concerned, it is proposed to amend the provisions of clause (c) of sub-section (1) of section 112 of the Income- tax Act, so as to provide that long-term capital gains arising from the transfer of a capital asset being shares of a company not being a company in which the public are substantially interested, shall be chargeable to tax at the rate of 10 per cent.

These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.

Clause 48 of Finance Bill 2016

Clause 48 of the Bill seeks to amend section 112 of the Income-tax Act relating to tax on long-term capital gains.

Sub-clause (iii) of clause (c) of sub-section (1) of the aforesaid section, inter alia, provides that long-term capital gains arising from transfer of a capital asset, being unlisted securities, shall be chargeable to tax at the rate of ten per cent.

It is proposed to amend the said sub-clause (iii) so as to provide that long-term capital gains arising from transfer of a capital asset being, shares of a company not being a company in which the public are substantially interested, shall also be chargeable to tax at the rate of ten per cent.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to assessment year 2017-2018 and subsequent years.

[Clause 48]

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