TIL Desk/Business/New Delhi-Allaying investor fears over the levy of long-term capital gains tax on share transfer in unlisted companies, the government on Friday said the move is only to target ‘khoka’ companies, and ‘genuine investments’ in start-ups and through FDI will be exempt. In an interview, Revenue Secretary Hasmukh Adhia said securities transaction tax was levied in 2004 and capital gains made out of STT-paid listed stocks are exempt from long-term capital gains tax.
“This is only available for listed securities. But people tried to use this window by creating one ‘khoka’ (shell) company, putting some investment in it (which is worthless), showing appreciation in that and then listing it and then (quickly) getting out of it,” he said. In effect, the investment was held for more than one year, but they exited the investment immediately after listing.
“So, it was the best route for converting entire black money into white without payment of any tax. This is how people tried to do it. By creating shell companies,” he said. The government is now saying such investors should have paid STT both at the time of entry and exit.
