A company listed earlier on BSE Ltd has been acquired by its foreign partner. The latter has made an exit offer to the shareholders. What will be the tax treatment of the money received from the acquirer? At present, I have no taxable income.
Capital gains arising on the transfer of shares are taxable depending upon the period for which such shares are held. If the shares are held for a period of at least one year, the gains arising on the transfer of such shares shall be taxable as long-term capital gains (LTCG). LTCG is computed by deducting the indexed cost of acquisition from the transfer price of the shares. LTCG from the sale of equity shares in a company is exempt from tax under section 10(38) of the Income-tax Act, provided such equity shares are sold through a recognized stock exchange and such transaction is chargeable to securities transaction tax (STT). Otherwise, such LTCG shall be taxable at the rate of 20% (exclusive of applicable surcharge of 5% and cess of 3%).
If the shares are held for a period of less than one year, the capital gains arising on the transfer of such shares are taxable as short-term capital gains (STCG). STCG is computed after deducting the cost of acquisition of the shares from their transfer price. STCG from the sale of equity shares in a company is taxable at the rate of 15% (exclusive of applicable surcharge of 5% and cess of 3%) under section 111A, provided such equity shares are sold through a recognized stock exchange and such transaction is chargeable to STT.
However, in case of a resident male individual, where the total income as reduced by LTCG and STCG is below the maximum amount not chargeable to tax (which Rs1.8 lakh for the assessment year 2011-12), then such LTCG and STCG shall be reduced by the amount by which the total income falls short of the exemption limit. Therefore, if you have no other taxable income, then your LTCG or STCG shall be reduced by the basic exemption limit of Rs1.8 lakh and the tax shall be levied on the balance gains.
My first employer shut office in June 2011. I worked there for three years. If I withdraw my accumulated provident fund (PF), would that be taxable?
If the contribution is being made to a recognized PF, withdrawal of the accumulated balance is not taxable even if the employee has not rendered five years of continuous service in case the employee’s service is terminated due to the contraction or discontinuance of the employer’s business.
However, if your PF is unrecognized, then at the time of withdrawal, the accumulated employer’s contribution and interest on employer’s contribution is taxable.
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