If you are investing in shares and availing benefit of sec 10 (38) which exempts long term capital gain on shares, there is a bad news for you. CBDT has considered a proposal to limit the scope of exemption only to companies constituting BSE 500 index.

This is done to prevent any misuse of section, which according to CBDT is currently used to introduce unaccounted money in the market.

At present, according to sec 10(38) sale of equity shares of any companies/units of an equity-oriented fund is exempt from tax if the transaction has taken after October 2004, and the securities transaction tax has been paid. In this context, an asset is defined as long term if it is held for more than a year.

This can be a major blow to many investors in the market who are genuinely trading in small cap companies which are not part of BSE 500 index.

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