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Finance Ministry proposes to relax conditions for availing 10% concessional LTCG tax

The Finance Ministry has proposed to relax certain conditions for availing a concessional tax rate of 10% on long-term capital gains (LTCG) arising from transfer of listed equity shares or units of equity-oriented fund. After a gap of 14 years, the Union Budget 2018 reintroduced 10% tax on LTCG exceeding Rs 1 lakh from sale of shares. However, LTCG tax was nil for shares sold after a year of purchase till March 2018, as per Budget 2018 proposals. LTCG on sale of unlisted shares is taxed at 20 percent, while short-term capital gain tax on it is 30 percent.

The Finance Ministry has said that to provide the applicability of the tax regime under Section 112A of the I-T Act to genuine cases where the STT could not have been paid, it has also been provided in sub-section (4) of Section 112A of the Act that the Central Government may specify, by notification, the nature of acquisitions in respect of which the requirement of payment of STT shall not apply in the case of acquisition of equity share in a company.

In the draft notification, the Central Board of Direct Taxes (CBDT) has specified the nature of acquisitions in respect of which requirement of payment of STT would not apply for availing the concessional rate of LTCG. Finance Act 2018 provided for long term capital gain tax on transfer of specified securities only if STT has been paid on acquisition and transfer of such capital asset. It also authorised the Central government to notify genuine cases where such payment of STT could not be done.

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