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IT Wants Details of Changes in Client Codes by Brokers

Various instances of client code changes by stock brokers between 2009 and 2011 has caught the attention of the income-tax department. A few brokers in Mumbai, Delhi, Gujarat and Rajasthan have got notices from the I-T department in January and February seeking details of changes to client codes in their system in the past few years mainly for assessment year 2010-2011.
Changing client codes within 30 minutes after the market closed to rectify any punching errors was a common practice in markets.
However, the I-T department feels the practice was turning into a scheme to avoid paying taxes as client code modifications constituted a staggering Rs.56,000 crore worth of trade ev` ery month. Tax officials believe that gains and losses were transferred from one account to another un der the guise of rectifying errors.
The I-T department is seeking details like the transaction ID original client code, modified client code, name of the origi nal client, PAN of the original client, name of the modified cli ent, PAN of the modified client scrip name, quantity , rate, total value of transaction, buy or sell and date of transaction for codes modified during the month.
I-T officials say the data of de rivative trades and client code changes in the segment was puzzling. In October 2011, the Securities and Exchange Board of India (Sebi) had disclosed that client code modifications fell 99% to Rs.120 crore every month after ` the regulator issued strictures against the practice.
It was the CBDT that had alerted Sebi and stock exchanges regarding the tax evasion practice through a circular.
It had come to light that a large number of client code modification was done in accounts pertaining to foreign institutional investors.
The Economic Times, New Delhi, 19th February 2016

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