InvestorQ : I have heard that there are some benefits of selling shares through the GIFT city exchange located in Gandhi Nagar in Gujarat. What is that?
Dia Deshpande made post

I have heard that there are some benefits of selling shares through the GIFT city exchange located in Gandhi Nagar in Gujarat. What is that?

Answer
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Ria Jain answered.
1 year ago


Exchanges located in the GIFT City in Gandhinagar are given some privileges for Indians to buy and sell in global shares at a concessional rate. Let us understand with the example of Pradeep Shah who is a self employed consultant working in the area of technical and plant consultancy. In the month of December 2017 he purchased 100 equity share of a US company Jacksons Ltd. @ $70 per share. These shares were sold in August 2018 @ $85 per share. No security transaction tax (STT) was payable on transfer of shares as same were listed in recognised stock exchange located at the GIFT City, Gandhinagar, which is an International Financial Services Centre as per the IT Act classification. How the STCG would be calculated in this case.

Section 111A is applicable in case of STCG arising on transfer of equity shares through recognised stock exchange and such transaction is liable to securities transaction tax. STCG covered under section 111A is charged to tax @ 15% (plus surcharge and cess as applicable). However, with effect from Assessment Year 2017-18, benefit of concessional tax rate of 15% has been specifically extended even in cases where STT is not paid, provided that transaction is undertaken on a recognised stock exchange located in any International Financial Service Centre or the consideration is paid or payable in foreign currency

In the given case, Pradeep Shah sold shares of Jackson Ltd. which were listed in recognised stock exchange located in an International Financial Services Centre (IFSC). Further, consideration has been paid in foreign currency which is one more condition. Shares were purchased in December 2017 and sold in August 2018, i.e. sold after holding them for a period of less than 12 months. Hence, the gain will be short-term capital gain.

In this particular case of Pradeep Shah, the shares were sold through recognised stock exchange located in an IFSC and consideration was paid in foreign currency (i.e., USD).Hence, the STCG can be termed as STCG covered under section 111A even if transaction of sale wasn’t chargeable to STT. Such STCG will be charged to tax @ 15% (plus surcharge and cess as applicable). This was an exception that was introduced specifically in the Union Budget 2017 as a means to encourage the development of GIFT City as an alternative to global financial centres like Dubai, Singapore and Hong Kong.