chargeability of capital gain on transfer of beneficial interest in securities by the depository

Section 45(2A) was inserted by the Depositories Act, 1996. the said Act provides that dematerialisation of
securities to avoid physical movement of scrips in order to ensure faster settlement of trade. In the register of
the issuing company, the depository (a company registered with SEBI) appears to be a registered owner of the
dematerialised securities. In the books of the depository, the real owner of the securities appears as the beneficial owner

A depository interacts with the investors through participants (agents of depository). For this purpose investors
have to enter into an agreement and open an account (which is just like a bank account) with the participant.
An investor may hold his dematerialised holdings in more than one account with one or more depositories. All
the transactions of sale and purchase of dematerialised securities are through the participants and are entered
in the respective accounts. The ownership is transferred through book entries in the statement of accounts.
• Capital Gain accrues to the Beneficial Owner (i.e. the Investor)-taxable as the income of the beneficial
owner of the previous year in which the transfer took place.
• Cost of Acquisition and period of holding is to be determined on FIFO method

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