New Delhi: All genuine transactions, including employee stock options, will be exempt from the proposed budget provisions on long-term capital gains tax (LTCG), finance ministry officials said on Monday, assuring investors that all such transactions will be protected.
The Union Budget 2017 proposed to deny LTCG tax exemption on sale of listed securities, if securities transaction tax (STT) was not paid at the time of acquiring them.
This was brought in as an anti-abuse provision to prevent misuse by shell companies.
Under current norms, any capital gains from shares held for more than a year are fully tax-exempt if STT of 0.1% is paid at the time of selling them.
Currently, STT is not paid when shares are acquired in off-market transactions such as gifting, issuing employee stock options and selling shares to private equity firms leading to concerns that such transactions could come under the tax department’s scanner.
The memorandum explaining the tax proposals had mentioned instances which will be exempt by the government through a notification. But it was silent on employee stock options.
“…to protect the exemption for genuine cases where the Securities Transactions Tax could not have been paid like acquisition of share in IPO, FPO, bonus or right issue by a listed company acquisition by non-resident in accordance with FDI policy of the Government etc., it is also proposed to notify transfers for which the condition of chargeability to Securities Transactions Tax on acquisition shall not be applicable,” the memorandum said.
Speaking at a post-budget event organised by the Confederation of Indian Industry, Sushil Chandra, chairman of the Central Board of Direct Taxes, said employee stock options will be a part of the exemption list along with other instances mentioned in the budget document.