India: The Government Notifies Share Transactions On Which Payment Of STT Is Not Required At The Time Of Acquisition Of Equity Shares For The Purpose Of Section 112A

Last Updated: 3 May 2018
Article by SKP  

The Finance Act, 2018 has introduced a new section 112A in the Income Tax Act, 1961 (the Act) which provides for taxation of long-term capital gains arising from transfer of a long-term capital asset being listed equity shares or equity oriented mutual fund or a unit of a business trust at the rate of 10%, if such capital gains exceeds INR 100,000.

As per the Section, the concessional rate of 10% can be availed only if Securities Transaction Tax (STT) has been paid on both the acquisition and transfer of equity shares/equity oriented mutual fund/unit of business trust.

There could have been many situations of acquisition where STT might not have been paid. For example, if the shares were acquired before 2004, then STT would not have been paid because the provision for payment of STT was introduced in 2004. To protect the genuine cases, Section 112A provided enabling provision by way of sub Section (4) which empowers the government to notify the nature of acquisitions where payment of STT may not be mandatory.

In light of the above, the government has issued a draft notification vide press release dated 24 April 20181, wherein it has specified the nature of acquisitions in respect of which payment of STT is not mandatory. They are as follows:

  • The said draft notification provides that the requirement of payment of STT is not applicable for all transaction entered before 1 October 2004 (i.e., transactions prior to the introduction of STT by the Finance Act, 2004).
  • In respect of transactions entered on or after 1 October 2004 which are not chargeable to STT, except for the following transactions:

Transaction Type Exemption from payment of STT in following cases
Acquisitionof existing listed equity share in a company whose equity shares are not frequently traded on a Recognized Stock Exchange (RSE) in India through a preferential issue. Acquisition of listed equity shares:
  • Approved by the Supreme Court, High Court, National Company Law Tribunal (NCLT), Securities Exchange Board of India (SEBI) or Reserve Bank of India (RBI);
  • By any non-resident under Foreign Direct Investment (FDI) guidelines issued by the Government of India;
  • Recognizedfund, venture capital fund or Qualified Institutional Buyer (QIB);
  • Preferentialissue to which the provisions of Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 do not apply.
Acquisition of existing listed equity share in a company not entered through a RSEof India Acquisition of listed equity shares:
  • By a company through an issue other than preferential issue (e.g., bonus shares);
  • By scheduled banks, reconstruction or securitization companies or public financial institutions during their ordinary course of business;
  • Approved by the Supreme Court, High Court, NCLT, SEBI or RBI;
  • Under employee stock option scheme or employee stock purchase scheme framed under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999;
  • By any non-resident under FDI guidelines issued by the Government of India;
  • Under SEBI (Substantial Acquisition of Shares and Takeovers), Regulations, 2011;
  • From the government;
  • By a recognized investment/venture capital fund or QIB;
  • By modes considered non-taxable transfer under the Act (like an eligible gift, transactions between subsidiary and holding companies, amalgamation, merger, demerger, slump sale, etc.) provided the original owner did not acquire the shares in the modes prohibited in (1) and (2) above.
Acquisition of equity share of a company during the period it has been delisted from a RSEtill the day immediately preceding to its re-listing on a RSE. No exemption provided.


1 Notification link

SKP's comments

This notification is in line with the notification dated 5 June 2017 issued earlier in respect of Section 10(38) of the Act for providing long-term capital gains exemption for shares on which STT was not paid.

On expected lines, this notification rightly covers cases of investment made under FDI policy, IPOs, ESOPs, etc. However, it would be pertinent to note that transaction like inter-transfer between promoter groups, strategic acquisitions by private investors, etc. is not covered. It appears that private acquisition by non-residents under FDI regulations may be better placed vis-à-vis Indian private investors.

The notification issued is a draft notification which is open for comments from stakeholders.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions