Unlisted Shares , Debentures & Bonds Gets Lower Tax Relief

Finance Act 2012 , as assented by the President ,has a great tax relief
provision for investors in private companies shares , debentures ,bonds and
other marketable securities
 Print  PDF Non Resident investor enjoy ! The Finance Act 2012 has brought a
great tax relief  for all non resident investors  who have private limited
company or closely held public company shares or have invested in debentures or
bonds . This is because any sale of unlisted shares,bonds or debentures or
marketable securities, after 01/04/2012 will have lesser tax liabilities thanks
to the sudden new provision entry in the Finance Act 2012 . The tax relief which
is brought in section 112 of the Income Tax Act , effective from 01/04/2012
(assessment year 2012-13 ) is that only 10 % of tax on long term capital gains
on arising on sale of unlisted securities , shall be imposed.The Tax Relief for
Unlisted Shares
The newly added tax relief provision u/s 112 as per Finance Act 2012 is as under
:

  In section 112 of the Income-tax Act, in sub-section (1), with effect from the
  1st day of April, 2013,—
  (A) in clause (c), for sub-clause (ii), the following sub-clauses shall be
  substituted, namely:—
  “(ii) the amount of income-tax calculated on long-term capital gains [except
  where such gain arises from transfer of capital asset referred to in
  sub-clause (iii)] at the rate of twenty per cent; and
  (iii) the amount of income-tax on long-term capital gains arising from the
  transfer of a capital asset, being unlisted securities, calculated at the rate
  of ten per cent on the capital gains in respect of such asset as computed
  without giving effect to the first and second proviso to section 48.”;
The aforesaid provision therefore makes it clear that only 10 % of the tax on
long term capital gains is to be charged . It also makes it clear that the
    Long term capital gains has to be computed without any indexation benefit .
    The shares on unlisted shares are not the only financial instrument such get
    benefits , but even other securities which are within the definition of
    section 2(h ) of SCRA will get the benefit of lower tax of 10 % .
What is the meaning of securities for tax relief?
The newly inserted amendment to section 112 also contains Explanation which
clarifies that meaning of securities will be the meaning as assigned by
Sub-clause (i) of Clause (h) of Section 2 of the Securities Contracts
(Regulation) Act, 1956 which is as under”:
  “Securities” include – (i) shares, scrips, stocks, bonds, debentures,
  debenture stock or other marketable securities of a like nature in or of any
  incorporated company or other body corporate;”
Thus , long term capital gains on bonds,debentures or other marketable
securities are also having the facilities of lower tax @ 10 % in case of long
term capital gains.
Important Note
The amendment is brought in clause c of section 112(1) which is applicable in
“case of a non-resident (not being a company) or a foreign company ” .
Therefore, the tax relief is applicable for all non residents except company and
a foreign company .
A foreign company is one which is not doemstic company (section 2(23A) of
I.T.Act)  and a domestic company as per section 2(22A) of Income Tax Act  means
  ” means an Indian company, or any other company which, in respect of its
  income liable to tax under this Act, has made the prescribed arrangements for
  the declaration and payment, within India, of the dividends (including
  dividends on preference shares) payable out of such income “
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    rajagopalan says:
June 2, 2012 at 11:38 am
your article give wrong information about the capital gain on unlisted
securities. It is applicable only to NON RESIDENT (NOT BEING COMPANY) OR A
FOREIGN COMPANY. The benefit goes only to NRI’s and Foreign Company only not for
resident.