Govt to issue exemption list on new tax for unlisted firms

Government will come out with an “exhaustive list” of transactions on which the “anti-abuse” provision of levying long-term capital gains tax on share transfer in unlisted companies will not be applicable.
Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra said the provision was introduced in Budget 2017-18 to plug bogus long-term capital gains being availed by investment in penny stocks and put an end to “sham transactions”.
“We are taking information from all stakeholders and we will give a very exhaustive list as to where Section 10(38) will not be applicable. It is absolutely an anti-abuse law which we have brought in and it will be used where the law is abused,” he said at a CII post budget meet here.
Finance Minister Arun Jaitley in his Budget for 2017-18 proposed 10 per cent long-term capital gains tax on those who acquired shares in unlisted companies after October 1, 2004, if they had not paid securities transaction tax (STT) at the time of purchase.
Chandra said genuine investors in IPO or those which have come in through FDI need not worry as there will be no change in policy with regard to capital gains.
“We will come out with clarification as to what kind of share transactions will be put (under this provision) so that there is no harassment,” he said.
The tax department has found that the route of long-term capital gains in unlisted shares was being misused in the last 2-3 years and estimated that ‘bogus’ gains availed by ‘khoka’ (shell) companies last year were Rs 80,000 crore.
Chandra said out of 15 lakh companies incorporated under Ministry of Corporate Affairs, only 6 lakh companies file Income Tax returns.
Out of these 6 lakh, 2.5 lakh companies show losses or zero income and 2.85 lakh companies disclose income less than Rs 1 crore.
Only Rs 36,500 companies file income tax return showing income over Rs 1 crore.
“Our purpose is everyone should be tax compliant. The big challenge is how to make it happen… Our work is clear, more people should come under tax net,” Chandra said. (PTI)