Financial Daily from THE HINDU group of publications
Thursday, Jul 28, 2005

Port Info

Group Sites

Home Page - Income Tax
Markets - Derivatives Markets

Tax set offs in stock options & futures contracts — CBDT spells out conditions for recognition of stock exchanges

Our Bureau

New Delhi , July 27

THE legal decks have been cleared for a taxpayer to set off for tax purposes, his profits and losses in `options' and `futures' (derivative instruments) contracts in stocks, against gains and losses from other sources of income.

The Central Board of Direct Taxes has now framed a new rule by which the country's stock exchanges would be specifically recognised for this purpose so that investors trading `derivative' contracts in these exchanges would enjoy the benefit.

The Finance Ministry has said that a stock exchange making an application for recognition by CBDT in this regard should have the approval of the Securities and Exchange Board of India for allowing members to trade in derivatives. The stock exchange would also have to maintain a complete audit trail of all transactions (in respect of cash and derivative market) for seven years on its system.

The stock exchange additionally has to ensure that transactions once registered in the system couldn't be erased or modified. Also, the particulars of the client (including unique client identity number and Permanent Account Number) should be duly recorded and stored in its database.

Prior to the Union Budget 2005-06, transactions for the purchase or sale of any commodity including stocks and shares were deemed as `speculative transaction' if they were settled otherwise than by actual delivery.

The treatment of transactions as "speculative" or "non-speculative" has a bearing on the set-off of losses, if any, in the subsequent years.

With systemic and technological advancements in stock markets and an excellent audit trail being provided by screen-based trading, the Government in the Union Budget 2005-06 decided to do away with the distinction between speculative and non-speculative transactions - particularly with reference to derivative transactions.

The latest stipulation does not cover derivative contracts in commodities traded in commodity exchanges in the country.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Punjab National Bank ICICI BANK

Stories in this Section
Rains fail to dampen Sensex

Mumbai is shut
Death toll at 99; property worth Rs 500 cr damaged
NCAER lowers GDP forecast marginally
Fire destroys ONGC rig near Mumbai; several feared dead
Higher refining margins push Reliance Ind Q1 net up 61 pc
`Most Indians bet on family support post-retirement'
The Hindu ad gets credit at NY fest
Exide to buy GMR stake in ING Vysya for Rs 203 cr
Only an investment for us, says Exide
Tax set offs in stock options & futures contracts — CBDT spells out conditions for recognition of stock exchanges

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line