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Journalism of Courage
Concerned over tax avoidance by foreign institutional investors, the government has proposed new guidelines that will try to distinguish stock traders from investors.
The new draft guidelines distinguish shares held as stock-in-trade and shares held as investment to plug tax avoidance, particularly by FIIs.
The Central Board of Direct Taxes has invited comments from all the stakeholders before May 25 on the draft guidelines.
Currently, FIIs pay only 10 per cent tax on short-term capital gains. They will have to shell out 41 per cent tax, if they are treated as traders. However, FIIs have said new draft rules gave discretionary powers to I-T officials.
The draft guidelines give 15 conditions to assessing officers to determine whether one is stock trader or investor. Guidelines ask the assessing officer to see whether the purchase and sale of securities was allied to one’s usual business.
All these tests have to be seen in totality with one another and not independently, the draft guidelines said.
