The Hindu : Business : Sale of dematted shares can avoid tax

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Monday, Nov 17, 2008
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Sale of dematted shares can avoid tax

Please refer to your answer in The Hindu dated October 27, 2008, relating to the query by a reader of her difficulties in ascertaining cost price for purposes of capital gains. There is a reference in the query that the shares are dematted. In such a case, the reader can sell the same through a stock broker paying securities transaction tax, thereby not only avoiding the ordeal of finding out the cost price or the price on the option date, but also avoid tax on capital gains altogether. This may be clarified, since the problem would persist only in the case of unlisted shares and where an assessee wants to make a private sale.

The above communication from G. V. Raman, FCA, Chennai, is pertinent and should have been pointed out in the answer.

If the shares are listed, the sale could be through a stock broker, so as to have the benefit of exemption under Sec. 10(38) and avoid capital gains tax at little cost of securities transaction tax. Since the surplus would be exempt, the question of finding out the cost for capital gains tax does not arise. The answer under reference should therefore be treated as confined to sale of unlisted shares and such sale of listed shares where the assessee wants to make a private sale of listed shares.

S. RAJARATNAM

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