23 June 2009
'A' has taken shares as loan from relative through demate account to settal the account with broker and subsequently shares has been return through demate account, as per CBDT circular it is not a transfer u/s 2(47) so nil taxation liability on transfer.But how and at what value entry will be passed in accounts.As the loan remains outstanding at end of the year.regarding sec 2 (47 ) as per circular no 751 of 1997 loan of shares is not transfer so capital gain tax does not arise .i wants clarification for book entry as this is friendly loan how the necessary entry @face value or @ prevailing market rate or @ cost of lender
24 June 2009
see what the law said as per section 2(47) transfer includes every such transaction which either transfer the right or extinguish the right of a holder. In your case when the shares were transferred from your demat account to your relative demat account you loose your right to enjoy the fruits of it and therefore it shall be a transfer and will be taxed accordingly. See when brocker transfer the shares from one demat account to another it wont attract STT and therefore benefit of sec.111A of 10(38) is not available. As the loan amount is returned through the same channel by which it is moved then the revrse entry will be journalised . i.e. at the time of loan you have debited the party account with corresponding effect to your investment a/c now when you recive your investment back pass the reverse entry and the difference will be your income. First entry will be journalised at the rate at which settlement of transaction takes place because this is the most convincing amount for the transaction and in case of return avg. price of the opening and closing price of the secuirities on that day will be considered.
24 June 2009
regarding sec 2 (47 ) as per cicular no 751 of 1997 loan of shares is not transfer so capital gain tax doesnot arise .i wants clarification for book entry as this is freindly loan how the necessary entry @face value or @ prevailing market rate or @ cost of lender
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