Selling shares? Will you have to pay CG tax?

- Sateesh Kumar

We will answer on the assumption that you have not taken delivery for the traded commodity. 

Considering this scenario, it is our opinion that the loss would be considered speculative in nature and hence can be set off against any speculative gain.

In case you are actively involved in commodity trading, the gains that may arise could be used to offset this loss.

• How commodity trading works
• How I lost money in commodity trading

My father and I had bought some shares a few years ago. The shares were in his name (first name) and mine (second name).

He transferred these shares on to my name (first and sole name) in February 2006. I sold them in March 2006.

Will this be considered as a short-term capital gain? Will the tax department look at it as purchased in February 2006 and sold in March 2006?

Or, will it be considered a long-term capital gain by taking the original date of purchase?

- Rajan

You could execute a gift deed for the transfer of such shares to your individual name.

In technical terms, a gift of property (like shares mentioned above) is not considered as a transfer liable to capital gains tax. In other words, if you execute a gift deed, saying your father gifted you the shares, you will not be liable for any capital gain tax.

Moreover, Section 49(1) of the Income Tax Act, 1961, specifies that the cost incurred by the previous owner in such a case would be that of the new owner. That means that the cost your father incurred to buy the shares would be taken as the cost when calculating tax. 

Similarly, the period of holding by the previous owner (your father in this case) would be considered in determining whether the asset is a long or short-term one. So if your father held the shares for a year and you held it for six months, the period of holding would be 18 months (from the time to buying to the time of selling).

Hence, in your case, the shares held/transferred to your name would be a long-term asset.

• Your queries on capital gains answered

My wife earns a salary of Rs 80,000 per annum. She recently made a profit on some shares that she sold.
If both her salary and capital gains are below the tax limit, will she have to file a return?

- Basantkumar Jena

If both the salary and capital gains are below the tax limit, then no tax is payable.

In your case, if your wife does not have total taxable income in excess of Rs 1,35,000 then there would be no tax liability. Hence, she would not be required to file her returns.