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Investor Guide

We are now providing some useful information to our investors. These may help them in taking their investment decisions. These are as follows:

  • Depository Services
  • Income tax Provisions on Dividend /Capital gains


Depository Services

The trading in physical segment is full of inefficiencies due to handling of large volumes of certificates and also involves various other problems like delays in transfer, delay in settlement, loss in transit, forged certificates, stolen certificates, mutilation of certificates, postal losses, court cases, litigation etc.

To overcome these deficiencies, a new system of trading, viz. Depository system was introduced, which facilitates investor to hold securities in electronic form and to trade in these securities. The first depository set up in India is National Securities Depository Limited (NSDL) and is promoted by IDBI, UTI and NSE.

Depository is an organisation which holds your securities in electronic (also known as ´book entry’) form, in the same manner as a bank holds your money. Further, a depository also transfers your securities without actually handling securities, in the same day as a bank transfers funds without actually handling cash.

Click here to download the PDF with the complete information about depository services.

Income tax Provisions on Dividend / Capital gains

The Finance (No.2) Act, 2004 has introduced certain new provisions with regard to Securities Transaction Tax and Capital Gains Tax.

For the benefit of our shareowners, the relevant latest provisions of the Income-tax Act, 1961 on dividends tax, capital gains tax and securities transaction tax are explained as follows:

Is the income received by way of dividend subject to Income tax?

The dividend, interim or final, paid or payable, on or after 1 April 2003, by any company including Reliance Infrastructure Limited to its shareholders is exempt from Income tax. However, the company is required to pay “Dividend Distribution Tax” at 13.06875% (tax at 12.5% plus surcharge plus education cess) of the amount distributed as Dividend in financial year 2004-05.

What is securities transaction tax?

Securities Transaction Tax (STT) is levied with effect from 1 October 2004 on the value of purchase or sale of securities. STT is payable on equity shares, units of an equity oriented fund and derivatives listed on a recognized stock exchange. Rate of STT on purchase or sale of shares is as follows:

Both the buyer and seller are required to pay STT at 0.075% on the price at which they are purchased or sold in delivery based transaction of equity share or units of equity oriented fund.

The seller is required to pay STT at 0.015% on the sale of securities in case of non-delivery based transactions (i.e. transactions squared off in the same settlement without taking delivery).

In derivates, the seller is required to pay STT at 0.01% on the price at which futures are traded (in futures) and on the aggregate of strike price and option premium (in Options).

What is short-term or long-term capital gains in shares?
Any gains arising out of transfer or sale of shares held for not more than 12 months prior to the date of transfer are treated as short-term capital gains. Any gains arising out of transfer or sale of the shares held for more than 12 months prior to the date of transfer are treated as Long Term Capital Gains. This classification would apply in those cases where the shares are held as “capital assets” and not as “trading assets”.

In electronic holdings where securities are purchased or sold periodically, how the cost of acquisition and the period of holding are to be determined for the purpose of classification and computation of Capital Gains?

The period of holding for ascertaining the classification i.e. Long Term or Short Term Capital gains and the Cost of Acquisition of the securities is reckoned on First-In-First-Out basis.

How long-term capital gains in shares are taxed?

Long term capital gains tax on sale of shares of any company, including Reliance Energy Limited, is taxed as follows:

  • With effect from 1 October 2004, long-term capital gains are exempt from tax if STT is paid on such transaction.
  • In respect of equity shares being a constituent of BSE-500 Index (REL is one of the constituents), long term capital gains will be exempt if it is acquired between 1 March, 2003 and 1 March, 2004.
  • In other cases, long term capital gains are taxed as follows:
    - With Cost Inflation Index benefits, at 20% (plus surcharge and education cess)
    - In other cases, at 10% (plus surcharge and education cess).


How Short Term Capital Gains in shares are taxed?

  • With effect from 1 October 2004, short term capital gains is taxed at 10% (plus surcharge and education cess),if such transaction is chargeable to STT. In those cases where the income (excluding the short term capital gains) is below the taxable limit, then only the excess above the taxable income, after including the capital gains will be taxed.
  • In other cases, it is taxed at the normal applicable tax rates.


What is the rate of surcharge on Income tax?

In case of individuals and Hindu Undivided Family (HUF), the rate of surcharge is 10% of income tax if the total income exceeds Rs. 8.5 lakhs.

In case of other assesses, the rate of surcharge is 2.5% of the income-tax amount.

What is education cess and how is it computed?

The rate of Education Cess is 2% of the amount of tax and surcharge thereon.