A nice artice i found on http://expattax.blogspot.com/
I don't want to pay taxes
Query
I have short term capital gain on sale of stock options but i don't want to pay any taxes. Is there any tax planning possible (not tax evasion) within the parameter of Income Tax Act? Alternatively can we plan for losses to avoid payment of taxes?
Solution
The answer may be No on the very first thought. How can any one plan for losses to set off short term capital gains. But when we dwell inside the Act, we find there is a possibility to do so if we take appropriate action. The same could be explained with the help of an example:
I purchased 100 shares of Reliance Industries Limited (RIL) @ INR 2000 on 5th January 2011 after the company announced bonus issue in the ratio of 1:1. The company has fixed the record date as 15th February 2011. I sold 100 shares of RIL on 20th February 2011 at 1100. No. of shares held after bonus issue is 200 shares
Capital Gain on sale of shares:
Sale Consideration : 1,100,00 (100*1100)
Purchase Price : 2,000,00
Short Term Capital Loss : 90,000
If the bonus shares alloted is held for more than one year from the date of acquisition, and sold on a recognized stock exchange and securities transaction tax is paid, capital gains would be exempt. However if the same is sold before one year capital gains would be computed in the manner as indicated below:
Sale Consideration : Sale Price * 100 (no. of shares)
(-) Purchase Price : NIL
Short Term Capital Gain / Loss :
The short term capital loss arising on sale of RIL could be used to set off short term gains arising on sale of stock options
I have short term capital gain on sale of stock options but i don't want to pay any taxes. Is there any tax planning possible (not tax evasion) within the parameter of Income Tax Act? Alternatively can we plan for losses to avoid payment of taxes?
Solution
The answer may be No on the very first thought. How can any one plan for losses to set off short term capital gains. But when we dwell inside the Act, we find there is a possibility to do so if we take appropriate action. The same could be explained with the help of an example:
I purchased 100 shares of Reliance Industries Limited (RIL) @ INR 2000 on 5th January 2011 after the company announced bonus issue in the ratio of 1:1. The company has fixed the record date as 15th February 2011. I sold 100 shares of RIL on 20th February 2011 at 1100. No. of shares held after bonus issue is 200 shares
Capital Gain on sale of shares:
Sale Consideration : 1,100,00 (100*1100)
Purchase Price : 2,000,00
Short Term Capital Loss : 90,000
If the bonus shares alloted is held for more than one year from the date of acquisition, and sold on a recognized stock exchange and securities transaction tax is paid, capital gains would be exempt. However if the same is sold before one year capital gains would be computed in the manner as indicated below:
Sale Consideration : Sale Price * 100 (no. of shares)
(-) Purchase Price : NIL
Short Term Capital Gain / Loss :
The short term capital loss arising on sale of RIL could be used to set off short term gains arising on sale of stock options
Keep watching for such savvy ideas
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