The Hindu : Business : No option to pay STT and avoid liability for capital gains tax

Online edition of India's National Newspaper
Monday, Feb 09, 2009
ePaper | Mobile/PDA Version

Business

Business

No option to pay STT and avoid liability for capital gains tax

In my reference to earlier query answered by you in The Hindu dated November 17, 2008, you had opined that compensation awarded for the shares not accounted for by the share broker may have to suffer capital gains tax as a sale not covered by the exemption under Sec. 10(38). If I pay Securities Transaction Tax (STT) by equating the arbitrator appointed by the stock exchange, who awarded the compensation with the stock broker, since the arbitrator is also a competent legal authority, there should be no liability. I had asked for a further clarification from you in the light of my argument awaiting answer week after week. I am writing this as a further reminder.

Sec. 10(38) exempts capital gains where any transaction is chargeable to STT levied under the scheme of taxation vide Chapter VII of the Finance (No.2) Act, 2004, which does not contemplate a situation as one faced by the reader. It is concerned only with the transactions through a stock exchange.

An investor has no option to pay STT in respect of transactions other than those put through a stock broker to avoid capital gains tax. There is also no discretion for the authorities to spare liability in such case. As opined in earlier answer, the amount itself may not have been liable, if it had been received as damages. But it has since been received as the price for the shares entrusted to the stock broker by way of compensation, liability for capital gains cannot probably be avoided.

As for complaints of non-receipt of prompt reply to a question or further question raised either personally or through the column, it has been repeatedly stated that it is not possible to answer all the queries raised. Queries of general interest are chosen for responses. Taxpayers are best advised not to depend on a possible answer for their tax compliance.

Queries are continued to be received with self-addressed envelope often on issues involving large liability as for capital gains and more often after the time limit for reinvestment for tax saving is also past. Where a possible liability is involved, taxpayers should seek professional advice and not depend on such general replies in the newspapers or casual advice obtained from persons who may not be briefed about all the facts or may not themselves be competent to deal with such issues.

S. RAJARATNAM

Printer friendly page
Send this article to Friends by E-Mail

Business

News Update

Stories in this Section

It’s not just the money, it’s the mindset

Gloomier by the day or can it get worse?

Real estate prices remain as an X factor

A re-look at document sharing, backing up services

No option to pay STT and avoid liability for capital gains tax

RBI notification on premature closure of senior citizens’ deposits

Downfall in demand affects industrial sectors: study

Fairs to help in marketing coir geo-textiles in world market