T. Banusekar

HINDUSTAN Lever had earlier issued bonus debentures. The company has now redeemed these debentures. Will this attract capital gains tax?

Meenakshy, N. G. Krishnan

Reply

The redemption of bonus debentures by Hindustan Lever will attract capital gains tax. You may also note that the benefit of indexation will not be available even if the gain arising is a long-term capital gain since the third proviso to Section 48 prohibits such indexation.

Query

Kindly clarify whether long-term capital gains is chargeable to tax in the current year?

Raji R. Saha

Reply

Long-term capital gains will normally be chargeable to tax. However, in case of transactions in shares or units of equity-oriented funds, if the sale is through a recognised stock exchange and if securities transaction tax has been levied at the time of such sale, the long-term gain will not be chargeable to tax.

Long-term capital gains on other assets will be chargeable to tax at 20 per cent, and, in the case of listed securities, only at 10 per cent computed without the benefit of indexation.

Query

Long-term capital gains on sale of listed securities and units of equity-oriented funds are exempt if the sale is through a recognised stock exchange and where the transaction of sale has suffered securities transaction tax.

I have some brought forward long-term capital loss, which can be carried forward and set off.

In the light of the fact that long-term capital gains is exempt, as stated above, what is the legal position with regard to set off of the brought-forward loss?

P. Padmanabhan

Reply

You are right in pointing out that the brought-forward long-term loss can only be set-off against long-term capital gain. In this light, you can set off the brought-forward losses only when you have a long-term capital gain which is chargeable to tax, such as a gain from transfer of immovable property, and so on.

Query

Can loss from speculative transactions be set off against profit from speculative transactions?

P. Jayesh

Reply

Loss from speculative transactions can be set off against profit from speculative transactions. There is no prohibition in the Act on such set-off.

The prohibition is only on setting off a loss from speculative transactions against income from any other source or head.

Query

I had invested in shares from various public limited companies prior to March 2003. I have in the current year sold the same. What will be the capital gains tax implications?

Kewal

Reply

The capital gains will be exempt if the sale has been through a recognised stock exchange and if securities transaction tax has been suffered at the time of such sale.

Else, the tax implications will be as it were prior to the amendments made by the Finance Act, 2004.

Query

If the long-term capital gain on sale of shares is exempt should I show this separately in my income-tax return?

N. Sankar

Reply

It would be advisable to show the amount that is claimed as exempt either in a column specifically found in the return of income or by way of a note in the return of income.

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