Whether loss from sale of Shares in off market transaction can be set off against LTCG in stock exchange




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Whether loss from sale of Shares in off market transaction can be set off against LTCG in stock exchange

 

Query 1]

I am holding some shares bought a few years ago & said shares are now not trading on stock exchange. I have earned Rs. 2,50,000/- as Long Term Capital Gain (LTCG) on sale of shares in this month. I want to set off loss on my old holdings, how can I book loss on these shares? Is there any way to sell such shares by paying STT on the same as shares that are not trading on recognized stock exchanges? 

Opinion:

  1. It appears that you have sold certain shares wherein you have earned LTCG of Rs. 2.50 Lakh. These shares are sold through stock exchange and duly covered by payment of Securities Transaction Tax (STT).
  2. Now, you want to sell certain other shares which are not listed and wish to adjust the Long Term Capital Loss (LTCL) on sale of such shares against LTCG of Rs. 2.50 Lakh.
  3. You can adjust the loss on sale of unlisted shares against the LTCG on sale of shares through stock exchange. As such, there is no need to pay the STT on sale of such unlisted shares.
  4. Sale of unlisted shares doesn’t require the payment of STT.

Query 2]

In The Tax Talk Dated 24.07.2023 you have mentioned as under:
“One of the tax saving options in your hands was section 54EC by investing the amount of LTCG in specified bonds issued by REC, PFC or IRFC. However, the investment was required to be done within a period of 6 months from the date of transfer, which is already over and so the option of exemption U/s 54EC is no longer there with you”. My query is whether the tax saving option under section 54EC is still available or the option has been closed now?

Opinion:

  1. Option to claim capital gain exemption u/s 54EC is live now also. However, the option is available only for a period of 6 months from the date of transfer. If any taxpayers fail to exercise the option of investment within a period of 6 months then such taxpayers cannot claim exemption u/s 54EC.
  2. In the query dated 24.07.2023 as mentioned by you, the property was sold in Dec-22 and he wanted to know if he can claim an exemption U/s 54EC by investing the amount in the month of July-23. Since the period was exceeding 6 months, the option to claim exemption U/s 54EC was not available with that taxpayer.

Query 2]

In The Tax Talk Dated 21.08.2023 titled “Guidelines issued by CBDT for taxing the income from life insurance policies with annual premium exceeding Rs 5 lakh”, it was mentioned as under:

“Taxation of Non-ULIP Policies:
Though ULIP policies were made taxable in 2021, other policies were enjoying the tax exemption till now. By the Finance Act-2023, the non-ULIP policies are also made taxable. Now, any amount received on maturity of insurance policies (other than ULIP) issued on or after 01.04.2023 having premium or aggregate of premium above Rs 5,00,000/- in a year will be taxable. This income shall be taxable under the head “Income from Other Sources”. Deduction shall be allowed for premium paid, if such premium has not been claimed as deduction earlier. Amount shall be taxable only on the policies issued on or after 1st April, 2023. All policies issued before 01.04.2023 will not be affected and it will continue to remain exempt from tax”.

With respect to this, my further queries are as under:

  1. If any person has taken three policies of Rs. 2 lacs each and he has claimed Rs. 1.50 deduction u/s 80C (which is highest permissible deduction U/s 80C) then whether entire maturity amount of 2 policies will be tax free and only proceeds of one policies will be taxable as deduction has been claimed in respect of that policies only?
  2. Please explain what will be the situation if assessee claims 80C deduction, whether profit or say difference will be taxable? Can indexation benefit be claimed against investment?                                                                                                                                                                                                                                                           Opinion:
  1. There appears to be some confusion. Deduction claimed is referring to not “Deduction U/s 80C” but “Deduction towards actual investment”.
    Let me clarify it with an example. Suppose Mr. Smart has taken a non-ULIP policy of annual premium of Rs. 6 Lakh on 01.04.2023 and has paid the premium for 10 Years. Total premium paid is Rs. 60 Lakh. Now, suppose he receives an amount of Rs. 70 Lakh in FY 2033-34 and Rs. 70 Lakh in FY 2034-35. In this case, Mr. Smart can claim deduction of Rs. 60 Lakh of premium paid in the last 10 years against its receipt of Rs. 70 Lakh in the FY 2033-34 or against the receipt in the FY 2034-35 or on equal or other proportionate. If he decides to claim the entire amount as deduction in the FY 2033-34 then only Rs. 10 Lakh will be taxable in that FY. In this case, against receipt of Rs. 70 Lakh in the next FY 2034-35, he will not be entitled for any deduction as the entire amount of premium paid has been claimed as deduction in earlier years and so the entire Rs. 70 Lakh will be taxable in FY 2034-35. In short, the actual investment amount will be eligible for deduction as per the choice of the investor. “Deduction claimed” here is referring to the deduction towards cost of investment and not deduction U/s 80C.
  2. Irrespective of the fact whether deduction U/s 80C is claimed or not, only the surplus will be taxable i.e., the premium paid will be eligible for deduction. The amount will be taxable as “Income from other Source”. Since the amount is not taxable under the head “Income from Capital Gain”, no indexation benefit would be admissible.




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