‘Annual Information Statement’, recently introduced under the Income Tax, covers 50 different information categories. ‘Sale of Securities and units of mutual fund’ is one of the information categories covered under ‘Annual Information Statement’ (AIS). Said information category is briefly explained in the current article.

Manner of preparation of information by Depository and ‘Registrar and Transfer Agent (RTA)’-

Following are the rules based on which information is prepared and reported by the depository and RTAs-

1. Reporting of only user-initiated debit transactions is done.

2. In the case of minors, details of legal/ natural guardian are provided.

3. Following method is adopted for determination of estimated sale consideration for the debit transaction-

    • The best possible available price of the asset with the reporting entity (for example – end of day price) will be taken as estimated sale consideration.

4. Securities will be classified into the specified security class. This will help to determine-

    • Type of asset (i.e., short term or long term); and
    • The applicable rate of tax.

Notably, any asset held for more than minimum period of holding (tabulated hereunder) will be treated as ‘Long term capital asset’. Accordingly, other assets will be treated as ‘Short term capital asset’-

Description of a specified class of security The minimum period of holding
Listed Equity Share 12 months
Listed Preference Share 12 months
Listed Debenture 12 months
Zero Coupon Bond 12 months
Listed Capital Indexed Bond 12 months
Units of UTI 12 months
Units of Equity Oriented Mutual Fund 12 months
Other Listed Securities (other than unit) 12 months
Unit of Business Trust 36 months
Other Units 36 months

The corresponding credit transaction is identified on the basis of the FIFO method (i.e., First In First Out). Accordingly, the estimated cost of acquisition for such credit transaction will be determined as under-

Annual Information Statement – Sale of securities & mutual fund units

Particulars The estimated cost of acquisition
In the case of OFF market credits NIL
Any other case Best possible available price with the reporting entity.

Source of information in ‘Annual Information Statement’ under the information category ‘Sale of securities and units of mutual fund’-

The following table explains the source of information under the referred information category-

Particulars Description of information
Sale of Listed Equity Share (Depository)  

 

 

In the Statement of Financial Transaction (SFT) reporting of the depository transactions-

the estimated sale consideration for the debit transaction is determined as per the best possible available price of the asset (end of day price) with the depository.

Sale of Listed Preference Share (Depository)
Sale of Listed Debenture (Depository)
Sale of Zero Coupon Bond (Depository)
Sale of Listed Capital Indexed Bond (Depository)
Sale of Unit of Equity Oriented Mutual Fund (Depository)
Sale of Unit of UTI (Depository)
Sale of Unit of Business Trust (Depository)
Sale of other units (Depository)
Sale of other Listed securities (Depository)
Buy back of shares
Sale of Unit of Equity Oriented Mutual Fund (RTA) In the Statement of Financial Transaction (SFT) reporting of the mutual fund transactions-

the sale consideration for the debit transaction is determined as per the best possible available price of the asset (end of day price) with the Registrar and Transfer Agent (i.e., RTA).

Sale of Unit of UTI (RTA)
Sale of Other Unit (RTA)

‘Annual Information Statement’ processing under the information category ‘Sale of Securities and units of mutual fund’-

The following information will be de-duplicated under ‘Annual Information Statement’-

1. Information reported by the RTA and Depository with respect to mutual fund transactions; and

2. Information reported by the Company and Depository with respect to buy back of shares.

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One Comment

  1. rugram says:

    The valuation method described has certain drawbacks. Share prices fluctuate very often during the course of a day. To report the sale price as at the end of the day, would therefore create problems when an assessee provides a different rate (the actual sale rate) based on the broker’s contract,. This would lead to disallowance of the amount reported by an assessee as capital gain. It is suggested that instead of the closing rate, the depository/stock exchange should give the range – the high and low values of registered trades on the transaction date, so that the tax department could see if the assessee-reported rate is fair.
    There have been cases where NSDL has classified a sale as ‘short term’ in the AIS statement despite the share being held for several years in an NSDL approved DP! How can NSDL decide whether a sale is a short term one or a long term one? If a shareholder transfers a share from one depository to another for personal reasons, and disposes of the share within one year of such transfer, would the transaction be classified as short term? Disputes are bound to arise in such cases of wrong classification. It is best to accept the assesssee’s ITR and ask queries if need be, rather than relying on the AIS.
    As for LIFO method for capital gain calculation, NSDL or CDSL don’t have details of actual purchase rates, particularly those securities purchased before these depositories came in existence. So what would be the ‘Best possible available price with the reporting entity’ in such cases?
    These problems are surely going to create a lot of disputes and harassment to taxpayers as the AIS system is supposed to be the last word.

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