CG Tax on Tax Free Bonds listed on BSE

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  1. R.K.Agarwal

    R.K.Agarwal New Member

    I had purchased Tax Free Bonds in January 2014 (IIIFCL/HUDCO). Interest is tax free and bonds are listed. If I sell the bond in market:
    1. Can Short Term Capital Gain (STCG) by selling such bonds before one year be set off against Long term Capital loss (LTCL) in shares where STT is not paid.?
    2. Can the LTCL in shares where STT is not paid be carried over for next year Tax Return if it is not set off against the STCG in selling of bonds.?
    3. What will be the tax on STCG? Is it 15% or as per Slab rate of income?
    4. Can STCG (where STT is paid) be set off against LTCL or STCL where STT is not paid.
     
  2. Prof Bajaj

    Prof Bajaj New Member

    1. No. Shares where STT is not paid will be treated like debt. Thus, the LTCL can be set off only against LTCG of Debt. (You can set it off against LTCG of STT-paid-Equity as well. But since that is anyways tax free, no benefit of doing that).

    2. Yes

    3. As per income tax slab.

    4. No. STCG on shares (where STT is paid) is taxed at 15%. STCG on other securities where STT is not paid is taxed as per income tax slab. Thus, they cannot be set off against each other.
     
  3. R.K.Agarwal

    R.K.Agarwal New Member

    Thank you Prof. Bajaj. It was very professional reply.
    By your reply I understand now that LTCL will be set off with LTCG of shares or bonds.
    Am I right sir?
    R.K.Agarwal
     
  4. Prof Bajaj

    Prof Bajaj New Member

    Thanks for your kind words of appreciation.

    Since you have incurred LTCL on Shares (non-STT paid), it will be better for you to offset them against any LTCG on non-STT paid security. It could be a bond, unlisted equity, debt mutual fund etc.
     
  5. R.K.Agarwal

    R.K.Agarwal New Member

     
  6. R.K.Agarwal

    R.K.Agarwal New Member

    Sir, I have incurred STCG on shares where STT is not paid. Can it be set off against LTCG where STT is not paid?
     
  7. R.K.Agarwal

    R.K.Agarwal New Member

     
  8. Prof Bajaj

    Prof Bajaj New Member

    If both are gains, how it will be set off ??

    May be you are saying that one of them is a loss.

    Non-STT paid STCG is clubbed with your income.

    Non-STT Paid LTCG is taxed at 10% without indexation or 20% with indexation.

    Thus, in my opinion, you cant set off them against each other.
     
  9. Esbee51

    Esbee51 New Member

    Sir,
    I had STCG STT paid and STCL STT not paid. These have not been allowed to be set off in AY 2014-15. I can understand the reason based on your reply. However, the STCL has been ignored and an equivalent amount added to income by CPC . Loss not allowed to be carried forward. Why ?

    Secondly, my spouse had STCL STT paid. That is also not carried forward. Any changes in IT rules this year has been responsible for these ?
     
  10. Prof Bajaj

    Prof Bajaj New Member

    In my opinion, STCL (STT Not Paid) can be treated as a business loss and should be allowed to carry forward.

    STCL (STT Paid), as per my knowledge, is not allowed to carry forward.
     
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