The Central Board of Direct Taxes (CBDT) today released the final Notification on section 10(38) of the Income Tax Act which exempts exempt specified deals from long-term Capital Gains Tax in cases where STT was not paid as provided in the Finance Act, 2017.
In a major move curb tax evasion through “sham transactions” in stock market and protect genuine ones, the Finance Act, 2017 had amended the provisions of section 10 (38) of the Act to provide that exemption under this section for income arising on transfer of equity share acquired or on after 1st day of October, 2004 shall be available only if the acquisition of share is chargeable to STT. However, to protect the exemption 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, it was also provided that the Central Government shall notify the acquisition for which the condition of chargeability to STT shall not apply.
With a view to give effect to the above provision, the Board had, earlier released the draft of the Notification and had requested stakeholder’s comments on it.
Prior to Finance Act, 2017, the section 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 1st October, 2004 and chargeable to Securities Transaction Tax (STT) under Chapter VII of the Finance (No. 2) Act, 2004.
Read the full text of the Notification below.
