Needs to file income tax return even if income exempt from long term capital gain on sale of shares

By | March 6, 2016
(Last Updated On: March 6, 2016)

Finance Bill 2016

Income tax return in case of exempt income

If you have earned long term Capital gain on sale of equity shares in a company or a unit of an equity oriented fund or a unit of a business trust on which security transaction tax has been made you are required to file income tax return , if your income exceeds  maximum amount not chargeable to tax (e.g Rs 250000 in case of Individual )

Relevant extract of Finance Bill 2016 are as follow :

It is proposed to amend the sixth proviso to sub-section (1) of the section 139 to include that if a person during the previous year earns income which is exempt under clause (38) of section 10 and income of such person without giving effect to the said clause of section 10 exceeds the maximum amount which is not chargeable to tax, shall also be liable to file return of income for the previous year within the due date.


Section 10 deals with Income not included in total Income

In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

section 10 (38) ..

any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust where—

 (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and

 (b) such transaction is chargeable to securities transaction tax under that Chapter :

Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB:

[Provided further that the provisions of this clause shall not apply in respect of any income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47.]]

Explanation.—For the purposes of this clause, “equity oriented fund” means a fund—

 (i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than sixty-five per cent of the total proceeds of such fund; and

 (ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) :

Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;


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