As far as equity/commodity derivative transactions entered through recognized stock exchanges in India are concerned, there is lot of confusion amongst the members as regards identification of speculative transactions for the purpose of I.T. Act. What are the exact provisions of I.T. Act in this regard?

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As far as equity/commodity derivative transactions entered through recognized stock exchanges in India are concerned, there is lot of confusion amongst the members as regards identification of speculative transactions for the purpose of I.T. Act. What are the exact provisions of I.T. Act in this regard?

A] Following stock exchanges are notified as recognized stock exchanges for the purposes of clause (ii) of Explanation (1) to clause(d) of proviso to section 43(5)(w.e.f. A.Y. 2006-07):

(1) NSE & BSE Notification No. SO 89(E), dated 25-1-06.

(2) MCX stock exchange Ltd. Notification No. SO 1327(E), dated 22-5-09

(3) United Stock Exchange of India Ltd. Notification No. 12/2011, dated 25-2-11

Therefore, eligible transactions (in equity or commodity derivatives) entered into in the above stock exchanges shall not be treated as ‘speculative transactions’ for the purpose of I.T. Act in view of saving clause (d) of section 43(5). The date of recognition of stock exchanges is irrelevant and all the eligible transactions entered therein w.e.f. 1-4-2006 shall be nonspeculative for the purpose of Incometax Act.

B] Following stock exchanges are notified as recognized ‘associations’ for the purposes of clause (iii) of Explanation(2) to clause (e) of proviso to section 43(5) (w.e.f. A.Y. 2014-15):

 

(1) National Commodity & Derivative Exchange Ltd. Notification No. SO 3513(E), dated 27-11-13.

(2) Universal Commodity Exchange Ltd. Notification No. SO 3514(E), dated 27-11-13.

(3) Multi Commodity Exchange of India Ltd. Notification No. SO 3539(E), dated 29-11-13.

(4) Ace Derivatives & Commodity Exchange Ltd. Notification No. SO 843(E), dated 20-3-14.

Therefore, eligible transactions [Chargeable to CTT] entered into in the above recognized ‘Associations’ shall not be treated as ‘speculative transactions’ for the purpose of I.T. Act w.e.f. A.Y 2014-15 in view of saving clause (e) of section 43(5).

[Note: Agricultural commodities which are not liable to CTT are almond, barley, cardamom, castor seed, channa/gram, copra, coriander/dhaniya, cotton, cotton seed oilcake/kapasia khali, guar seed, isabgul seed, jeera, kapas, maize feed, pepper, potato, rape/mustard seed, raw jute, red chilli, soya bean/seed, soymeal, turmeric, wheat]

However, w.e.f. A.Y. 19-20, for the purposes of clause (e) of the first proviso to S. 43(5), in respect of trading in agricultural commodity derivatives, the requirement of chargeability of commodity transaction tax shall not apply.

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