LTCG on shares inherited before 31/1/2018
This query is : Resolved
26 July 2023
For shares purchased before 31/1/2018, there can't be LTCL?
For example I have inherited Eicher Motors shares before 31/1/2018. So I don't know purchase price. The price on 31/1/2018 is ₹ 27,347. I sold on 12/30/2022 for ₹ 3450. Now can I claim LTCL of ₹ 23,897?
Thank you
For example I have inherited Eicher Motors shares before 31/1/2018. So I don't know purchase price. The price on 31/1/2018 is ₹ 27,347. I sold on 12/30/2022 for ₹ 3450. Now can I claim LTCL of ₹ 23,897?
Thank you
26 July 2023
Eicher Motors shares traded ex-split on 24th August 2020 for sub-division of its stock in 1:10 ratio.
In your case COA is 2,735/-
In your case COA is 2,735/-
27 July 2023
I understand about COA and purchase price, but I am told that irrespective of any price we can't claim long term capital loss.
27 July 2023
How can you claim loss when there is LTCG???
28 July 2023
Dear Sir, Forget about Eicher Motor. ANY share which is purchased before 31/1/2018 with COA is more than selling price, can we claim LTCL?
Simply said, under section 112A YOU CAN'T show LTCL in any circumstance.
Grandfathering provision: Since investors purchased the above shares prior to 31.01.2018 believing it is exempted u/s 10(38), grandfathering provision was given to all those investors to take the FMV as on 31.01.2018 or Cost of Acquisition (COA) whichever is higher as cost in computing the LTCG u/s 112A. However, the cost will be restricted to lower of sale proceeds or COA. Hence, incurring loss in the above case is not possible. The overall point in the introduction of the above provision is to not to tax the gain accrued to the investors till 31.01.2018 on such capital asset.
Read more at: https://www.caclubindia.com/articles/set-off-loss-under-the-head-capital-gains-38750.asp
Is this true?
Simply said, under section 112A YOU CAN'T show LTCL in any circumstance.
Grandfathering provision: Since investors purchased the above shares prior to 31.01.2018 believing it is exempted u/s 10(38), grandfathering provision was given to all those investors to take the FMV as on 31.01.2018 or Cost of Acquisition (COA) whichever is higher as cost in computing the LTCG u/s 112A. However, the cost will be restricted to lower of sale proceeds or COA. Hence, incurring loss in the above case is not possible. The overall point in the introduction of the above provision is to not to tax the gain accrued to the investors till 31.01.2018 on such capital asset.
Read more at: https://www.caclubindia.com/articles/set-off-loss-under-the-head-capital-gains-38750.asp
Is this true?
28 July 2023
The topic is given to explain how the grandfathering works, which is subject to deformation of any kind of shares after 31.01.2018. There are many scripts where companies have split (which is a continuous process) their shares after the Grandfathering date. Do you mean one should go blindly without considering these effects?
29 July 2023
After all consideration, split, bonuses etc, if COA is more than selling price, can LTCL can be claimed? Does section 112A says that you can not claim LTCL on grand father's script. Is that true?
29 July 2023
In such examples the total investment value is reduced from total sells consideration to arrive at gain or loss. The total investment value can be actual purchase price or value as on 31.012018.
29 July 2023
If no such incidents have occurred after 31.01.2018, in that case the LTCG is calculated as explained below, otherwise as reduced by the effect ::
With the insertion of section 112A, a corresponding clause was also inserted in section 55. Clause (ac) of subsection 2 of section 55 provides for the determination of Cost of Acquisition of an asset referred to in Section 112A. Accordingly, where a Capital asset referred in section 112A is acquired before 1st February, 2018, the Cost of Acquisition of such asset shall be the higher of:-
(i) Cost of Acquisition of the asset and
(ii) Lower of–
A. Fair market value of the asset as on 31st January, 2018 and
B. Full value of consideration received or receivable as a result of the transfer of the capital assets.
After combined perusal of the above provisions of section 112A and Clause (ac) of subsection 2 of section 55 of IT Act, the following scenarios may be seen as under-
1. Purchase and Sale before 1/02/2018.
In this case, the entire Capital Gain shall be exempt under section 10(38) of IT Act (if the same is LTCG).
2. Purchase before 01/02/2018 and sale on or after 01/04/2018.
In this case, the Cost of Acquisition will be determined as per clause (ac) of section 55 of IT Act, since the asset is acquired before 1st February, 2018. Also, the provisions of Section 112A shall apply since the transfer has taken place on or after 1st April, 2018 (subject to transfer is of long-term capital asset). Therefore, any LTCG in excess of Rs. 1,00,000 shall be taxed at the rate of 10% under section 112A.
3. Purchase on or after 01/02/2018 and sale before 01/04/2018.
In this case, the provisions of Section 112A of IT Act is not applicable as the Section 112A has been inserted by the Finance Act, 2018 w.e.f. 01/04/2019 (i.e.the transfer has taken place before 1st April, 2018). Moreover, since the asset is transferred within a period of 3 months, the same shall be considered as Short-Term Capital Asset and any gain shall be charged to tax in accordance with the provisions of Section 111A.Thereofre, Section 10(38) of IT Act is also not applicable as the same is applicable in case of Long-Term Capital Assets.
With the insertion of section 112A, a corresponding clause was also inserted in section 55. Clause (ac) of subsection 2 of section 55 provides for the determination of Cost of Acquisition of an asset referred to in Section 112A. Accordingly, where a Capital asset referred in section 112A is acquired before 1st February, 2018, the Cost of Acquisition of such asset shall be the higher of:-
(i) Cost of Acquisition of the asset and
(ii) Lower of–
A. Fair market value of the asset as on 31st January, 2018 and
B. Full value of consideration received or receivable as a result of the transfer of the capital assets.
After combined perusal of the above provisions of section 112A and Clause (ac) of subsection 2 of section 55 of IT Act, the following scenarios may be seen as under-
1. Purchase and Sale before 1/02/2018.
In this case, the entire Capital Gain shall be exempt under section 10(38) of IT Act (if the same is LTCG).
2. Purchase before 01/02/2018 and sale on or after 01/04/2018.
In this case, the Cost of Acquisition will be determined as per clause (ac) of section 55 of IT Act, since the asset is acquired before 1st February, 2018. Also, the provisions of Section 112A shall apply since the transfer has taken place on or after 1st April, 2018 (subject to transfer is of long-term capital asset). Therefore, any LTCG in excess of Rs. 1,00,000 shall be taxed at the rate of 10% under section 112A.
3. Purchase on or after 01/02/2018 and sale before 01/04/2018.
In this case, the provisions of Section 112A of IT Act is not applicable as the Section 112A has been inserted by the Finance Act, 2018 w.e.f. 01/04/2019 (i.e.the transfer has taken place before 1st April, 2018). Moreover, since the asset is transferred within a period of 3 months, the same shall be considered as Short-Term Capital Asset and any gain shall be charged to tax in accordance with the provisions of Section 111A.Thereofre, Section 10(38) of IT Act is also not applicable as the same is applicable in case of Long-Term Capital Assets.
13 September 2024
Good luck.
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