Tax Savings on Long term capital loss from shares

Provision of Tax on LTCG on shares
Before understanding this, we need to understand the taxabilty provisions on Long term capital Gain/Loss From shares and securities
1. From 1.10.2004 onwards sale of a long term security (means where holding period is more than 12 month) ,on which STT paid (Securities Transaction Tax) is not liable for tax and fully exempted from Income Tax.
2. As the long term capital gain from the sale of securities is exempted from tax ,loss from such deals can not be adjusted from the other capital gain and can not be carry forward either.
3. Securities Transaction tax (stt) is payable for transaction made through stock exchanges.
if you are planning to sell the shares on which you will have long term capital loss ,then sell them out of the exchange without paying STT and save tax .lets study with a example.
Example: Krishna has sold a shares for 300000 which he has purchased for 500000 ,13 months back.similarly he has also sold a land for 500000 which he has purchased for 100000 four year ago. Krishna has also salary income for Financial year 2008-09.
calculate tax in two situations
1. shares has been sold through stock exchange means stt paid.
2. shares has been sold to friend out of exchange.
Ans:Case -1:Calculation of tax Case one(through stock exchange)
income from salary =300000
Income from capital gain on capital gain =400000
tax liability=on 150000-300000 @ 10%=15000
20% on 400000 LTCG =80000
Net tax liability=15000+80000=95000
long term loss from shares sold through exchange being exempted income can not be adjusted from LTCG on land,and not not be carry forward either.
Case-2:(shares sold to friend out of stock exchange ) no stt paid
Income from salary =300000
Income from Long term capital gain
LTCG from land =400000
Less:LTCL from Shares=200000
net LTCG =200000
tax liability
salary=10% on 300000-150000=15000
Ltcg=20% on 200000 =40000
net tax liabilty =55000
so in First case Tax Liability is 95000 where as in second case the tax liability is 55000 means saving of 40000 tax by not selling shares through exchange !!!
Further if we have sold share out of exchange this year and made a loss and have no other long term capital gain then we can carry forward the loss for next eight years and adjust the loss from other long term gain,means the benefit is definite if we adjust it in this year or next eight year.
1. To avoid complication in calculation Indexation on cost of capital assets has not been done.
2. Shares and securities word has been used interchangeable though differently defined under the read accordingly.
3. Sucharge and Cess on tax has also not shown to avoid complications.
4. You can also save tax from short term capital loss from same trick.