Income Tax department clarifies on capital gains for 2000-13 period

NEW DELHI: With an aim to reduce litigation and easing burden of compliance, the Income-Tax Department today said the amount received on buyback of shares between period April 1, 2000 and May 31, 2013 will be taxed as capital gains and not dividend in the hands of the recipient.

"On the issue of consideration received on buyback of shares between the period April 1, 2000 to May 31, 2013 it has been clarified that such consideration will be taxed as capital gains in the hands of the recipient. Such amount will therefore not be treated as dividend. No fresh notice will be issued by the Department on this matter," a finance ministry statement said.

It would mean that the amount received by the companies between April 1, 2000 and May 31, 2013 will be subject to capital gains tax, it added.

The statement further said the income tax department has already issued a circular enunciating the principles regarding treatment of income derived from transfer of shares and securities as capital gains or business income.

"The circular clarifies the situations in which the surplus generated on sale of shares and securities will be treated as business income or capital gains," it said.

The Central Board of Direct Taxes ( CBDT) has also taken a number of decisions to clarify the applicability of various provisions of the Income-tax Act with the objective of easing the burden of compliance and reducing litigation.

Recently, the CBDT had clarified through that under section 80IA the eligible assessee has the option of choosing the initial year from which the deduction can be claimed.

Once the assessee has exercised the option of choosing the initial year, he shall be entitled to the deduction under the section from such year if he fulfils the conditions prescribed in the section, the circular had said.