- Shares held in a company
- Any securities (Debentures/ Govt. securities) listed on a recognised Stock exchange
- Units of UTI/ Units of recognised Mutual Funds
- Zero Coupon Bonds
The benefit of indexation does not apply to these assets, the entire gain is exempt from tax if STT is paid on them while selling through authorised Stock exchanges. These assets thus offer the investor more tax efficient means of investment.
Treatment of Capital Loss:
1. Losses under the head “Capital gains” cannot be set off against income under other heads of income.
2. Short-term capital loss can be set off against any capital gain (whether long-term or short-term)
3. Long-term capital loss can be set off only against long-term capital gain.
4. A long-term capital loss for a case where the long-term capital gain is exempt from tax will have no value. For example, if a share is held for a year or more and then sold at a loss, there will be no tax benefit. So this loss cannot be set off against any other income.
5. If the capital loss cannot be set off against the capital gain of that particular year then it can be carried forward for the next eight years.
In the light of the above, investors are advised to take advantage of the provisions of IT Act for long term capital gains. Equities/ Mutual Fund units are preferred investment options because of the special treatment accorded to them. However, investors also need to understand the importance of short term capital gains/ losses to re balance their portfolios.
1 comment:
HI,
Under this situation, if the market crash or panic selling during march09-may 09, you are advising retail investors to invest in equities, but PLEASE be more specific of which stocks(name of the companies) to invest, which will be REALLY beneficial to layman retail investors WHO innocently enter into bad scripts.(i understand no one can predict the scripts performance, but atleast suggession from knowledgable people is better than layman)
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