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T. Banusekar

IS THE rate of tax on long-term capital gains 10 per cent or 20 per cent? Can rebate under Section 88B be claimed by a senior citizen against the tax on long term capital gains?

K. S. Srinivasan

Reply

Long-term capital gains is normally to be taxed at the rate of 20 per cent (as increased by a surcharge where applicable).

However, if such gain arises from the transfer of listed securities, the tax at 20 per cent on the capital gain is to be compared with 10 per cent of the gain computed without the benefit of indexation and the excess over such 10 per cent is to be ignored. In other words the tax would be the lower of 20 per cent of the gain computed with the benefit of indexation or 10 per cent of the gain computed without the benefit of indexation.

The rate of tax on long-term capital gains is prescribed in Section 112 of the Act.

This section prohibits the claiming of a rebate under Section 88 against the tax on long term capital gains.

There is no prohibition on claiming the rebate under Section 88B. The reader can, therefore, claim the rebate under Section 88B against the tax on long term capital gains.

It may be mentioned here that the rebate under Section 88B is available to an individual who is a resident in India and who is 65 years or more at any time during the previous year.

The rebate is a sum of Rs 15,000 or the tax of the assessee, whichever is lower.

Query

I trade frequently in shares. Is the gain/loss to be treated as business income or is it to be shown under the head capital gains?

Rakesh Ranjan

Reply

The purchase and sale of shares would not normally be treated as part of business if the shares were purchased for the purpose of investment out of surplus funds or to acquire controlling interest in the company.

However, the fact that such purchase and sale is done at very frequent intervals would go to show that it is a business transaction which is intended and not a transaction intended for investment.

The facts of each case will have to be examined to arrive at a proper conclusion in the matter.

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