Section 45(2A) - Transfer of beneficial interest in securities - Income Tax - Ready Reckoner - Income Tax

Section 45(2A) - Transfer of beneficial interest in securities Where any person has had at any time during previous year any beneficial interest in any securities, then, any profits or gains arising from transfer made by the depository or participant of such beneficial interest in respect of securities shall be chargeable to income-tax as the income of the beneficial owner of the previous year in which such transfer took place and shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of section 10(1) of the Depositories Act, 1996. Full value of consideration and period of holding For the purposes of section 48 and proviso to section 2(42A) , the cost of aquisition and the period of holding of securities shall be determined on the basis of the first-in-first-out method. When the securities are transacted through stock exchange, it is the established procedure that the broker first enter into contract for purchases/ sale of securities and thereafter, follow it up with delivery of share, accompanied by transfer deeds duly signed by the registered holder. The seller is entitled to received the consideration agreed to as on the date of contract. Thus it is the date of broker 's note that should be treated as the the date of transfer in case of sale transaction of securities provided such transaction of securities provided such transaction are followed up by delivery of share and also the transfer deeds. Similarly , in respect of the purchases of the securities, the holding period shall be reckoned to take place directly between the parties and not through stock exchanges. The date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of share and the transfer deeds. Where securities are required in several lots at different points of time, the First-In-First-Out (FIFO) method shall be adopted to reckon the period of the holding of the security, in cases where the date of purchases and sale could not be correlated through specific number of the scrips. In other words, the assets acquired last will be taken to be remaining with the assessee while assets acquired first will be treated as sold. Indexation, wherever applicable, for long-term assets will be regulated on the basis of the holding period determined in this manner. [ Circular No. 704 , dated 28.04.1995 ] Meaning of certain terms Beneficial owner - A person whose name is recorded as such with a depository Depository - A company formed and registered under the companies act, 1956 and which has been granted certified or registration under section 12(1A) of the securities and Exchange Board of India Act, 1992.