I would like to put in a few points here :
So far as LTCG is concerned…
Keep a separate demat account for your long term investments where you intend to hold the shares for more than 12 months.
Please take care to see that these shares are reflected as investments in your balance sheet
Take care that you have not acquired these shares out of borrowed funds.
In case you want to claim STCG , the basic criteria is that you should have some regular source of income apart from dealing in shares. Besides the frequency of trades, holding period and whether you have used borrowed funds too shall be considered by the assessing officer to determine whether to treat it as business income. In case your major source of income is from shares and the frequency of trades is very high then the officer can hold the view that it is your business and tax it accordingly.
If you claim interest expense on your borrowed funds then of course it is business income. If you don’t then I am not sure where will it be classified. Bit of a grey area.
I received a notice regarding off market transaction. i had transferred shares in my demat account with ICICI into my wife demat account as i wanted to close my icici demat account. Our DIS got misplaced while shifting or otherwise. We can’t trace it. There was no monetary consideration. It was clearly mentioned that the transfer was to wife. Wife sold it after some time. The period of holding from my purchase date to wife s selling date is more than an year. STT was paid while purchasing and selling but not while transferring to wifes account.
What explanation and what documents will be sufficient to satisfy IT?
Transfer from you account to your wife account should not be taxable.
Now the question is what be the date of purchase in your case. Will it be that date when you purchased it or when you transferred the same to your wifes account? I think it should be the date when you purchased it. You should gather some proof to substantiate which date of purchase will be applicable.
Documents you can use
Contract note of your purchase.
NSDL CAS of your wife which will show from which demat account she has received the shares.
Disclaimer
I am not a lawyer. Neither I am tax expert. Kindly take professional help.
Transfer of assets between and wife can be a gift, and such gift transactions are not taxed in your hands (as a transferor). You may not have the DIS, but your wife’s Demat statement showing credit entry and your account showing debit entry is good enough.
You need to establish through evidence that the transfer was to a person who is your wife (marriage certificate, etc).
Feel free to direct message me for any more clarification.
What your wife subsequently did with those shares is not under question because that transaction is outside the purview of the notice that you have received.
Ideally you should have preserved all the CAS, you should know that it is a digitally signed document and will be of immense value.
You can go to the website of NSDL CAS and see if you can download previous reports. Alternatively you can use the statement of you wife Demat account, it should show have information necessary to prove your case.
I would request you keep the thread updated with progress of your case for benefit of community.
Can someone please help me with my question. Background:
I have only one demat account with Zerodha.
I have LTCG (ie shares sold after 1 year), STCG (delivery based, sold within one year but not intra-day) & FnO (Options trading. Only options, no futures).
STCG and FnO have high volumes.
Now my doubts are.
a. Could I take LTCG benefit of 0 Tax rate
b. STCG benefit of 15% tax rate
c. FnO will be under business income and taxed 30%.
Or everything I have to club under business?
Audit
I believe audit will be required mandatory as volume are above 1 cr.
How much are audit expense?
As far as my knowledge goes you can keep two separate demat accounts one for business and and one for investment an declare as such to the income tax. There are precedents set with Judicial pronouncement to this effect. Please search the web and update the forum also.
Disclaimer -
I am not a lawyer. I am not a tax expert. Please take professional help.
Thanks for your answer. You mentioned take professional help. Do you know one such. Because any CA I talk they are equally confused and inconsistent. Is there anyone you know (better in bangalore) who can take care of this?
I don’t know what the periods pertain to, because CAS was started only a few years ago. Just call up NSDL and ask them.
Please also note that in case you are not able to get it from NSDL, please write a note stating the facts and ask the officer to get that information from NSDL / ICICI under Section 133 wherein these entities cannot deny information.
Please refer to Part 3(b) of the said Circular reproduced below:
In respect of listed shares and securities held for a period of more than 12 months
immediately preceding the date of its transfer, if the assessee desires to treat the
income arising from the transfer thereof as Capital Gain, the same shall not be put
to dispute by the Assessing Officer. However, this stand, once taken by the
assessee in a particular Assessment Year, shall remain applicable in subsequent
Assessment Years also and the taxpayers shall not be allowed to adopt a
different/contrary stand in this regard in subsequent years;
Therefore as per the above, the stand taken by an assessee cannot be disputed by the AO. However, in subsequent years you cannot change the stand.
If you treat the transfer as gift, the same shall be chargeable in your wife’s hands. For the purpose of computing the date of acquisition in case of gifts received, the date of acquisition of the previous owner is to be considered.
In your case, as the shares were held for more than one year, the same is eligible for LTCG and hence no tax.
I have mailed all the docs that I had like my wife demat ledger…all that was asked in the notice. It has been 3 days now. I am not sure if I will ever get to hear from IT anymore on this because that is what the case had been on earlier occasion. If anything comes, i will update.
