Section 10(38) : LTCG on transfer of equity shares or units of equity fund

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In exercise of the powers conferred under section 10(38), central government hereby specifies following transactions for sale of equity shares or units of equity oriented fund which shall be exempt from capital gains.

This notification lists out transactions which will be entered in accordance with third provisio of section 10(38), as inserted by finance act 2017. This notification shall take effect from 1st April 2018.

Notification :  43/2017

1. Exempted :Where acquisition of existing listed equity shares in a company whose shares are not frequently traded on a stock exchange is made through a preferential issue.

Exceptions : However, this clause shall not apply where such acquisition:

a) has been approved by Supreme court, high court , National company law tribunal, SEBI or RBI.

b) has been entered into by a non resident in accordance with FDI guidelines.

c) is entered into by an investment fund [115 UB (1)] or a venture capital fund [10(23FB)] or qualfiied instiitutional buyers.

d) is through preferential issue  to which the provisions of chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 does not apply.

Note: “frequently traded shares” means shares of a company, in which the traded turnover during past twelve calendar months preceding the acquisition and transfer is at least ten per cent. of the total number of shares of such class of the company.

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2. Exempted : Where transaction for acquisition of existing listed equity share in a company is not entered through a recognised stock exchange of India.

Exceptions: Nothing contained in this clause shall apply to the following acquisition of listed equity shares in a company made in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956

a) Acquisition through an issue other than a preferential issue.

b) Acquisition by scheduled banks, reconstruction or securitisation companies or public financial institutions during their ordinary course of business

c)Acquisition approved by Supreme court, high court , National company law tribunal, SEBI or RBI.

d) Acquisition under ESOP or ESPS scheme.

e) Acquisition by a non resident in accordance with FDI guidelines.

f) Acquisition of shares is made under Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 2011

g) Acquisition from the government

h) Acquisition by an investment fund [115 UB (1)] or a venture capital fund [10(23FB)] or qualfiied instiitutional buyers.

i) Acquisition by mode of transfer referred to under sections 47 or 50B of the Income-tax Act [other than points 1, 2 & 3]

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3.  Acquisition of equity share of a company during the period beginning from the date on which the company is delisted from a recognised stock exchange and ending on the date immediately preceding the date on which the company is again listed on a recognised stock exchange in accordance with the Securities Contracts (Regulation) Act, 1956 read with Securities and Exchange Board of India Act,1992

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