CBDT ISSUES NORMS FOR STOCK GAINS

The Central Board of Direct Taxes (CBDT) has directed tax officials to assess liability for those transacting in shares on the basis of principles laid down by the Authority of Advance Rulings (AAR). These principles distinguish between shares held as stock-in-trade (trading assets) and those held as investments. The circular implies that tax assessing officers will henceforth have to look into the holding pattern of the securities bought and sold, the sale-purchase ratio, the time involved, the funding sources and the overall trade volume when determining the tax liability involved among others. The CBDT has also said tax payers can have two portfolios – an investment one, comprising securities treated as capital assets, and a trading one, comprising stock-in trade, treated as trading assets.