Section 10(38) of the Income Tax Act, 1961 provides that long term capital gains arising from transfer of any equity share of a company or a unit of an equity oriented fund shall be exempt from tax w.e.f 1.10.2004 provided the transaction of sale is subject to securities transaction tax (STT). The exemption will apply to all assessees.
However, w.e.f assessment year 2007-08, long term capital gains arising on transfer of equity shares or a unit of an equity oriented fund, will be included for computing book profits in case of companies for the purpose of MAT u/s 115JB.
â€˜Equity Oriented Fundâ€™ means a fund where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 50% of the total proceeds of such fund and which has been set up under a scheme of a mutual fund specified u/s 10(23D).
For the purpose of calculating the percentage of equity shareholding of the fund, annual average of the monthly averages of the opening and closing figures shall be taken.
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