What is a recognized Stock Exchange - CBDT clarifies
As per Section 43 of the Income Tax Act, an electronic transaction on derivatives carried out in a recognized stock exchange is deemed to be not a speculative transaction. Now the stock exchange is not what you think. The Act says it is a recognized stock exchange which fulfills the conditions notified by the Board. And now the Board has come with the conditions.
1. The exchange should be recognized by SEBI
2. The exchange should record the client's id and PAN in its records
3. An audit trail of the records should be maintained in the system for seven years
4. It should be ensured that the data once entered cannot be erased or modified.
Those willing for these conditions have to apply to the Member(L) of the CBDT and the Government after examining the applications will notify the recognized stock exchanges.
If you are into derivative trading, do check up whether your stock exchange is recognized by the CBDT.
NOTIFICATION NO. , Dated : July 1, 2005