Taxability of Capital Gain
This query is : Resolved
03 May 2008
One of our client had 2,000 DSE (non listed shares)purchased in 1998 for Rs. 25,00,000.
He was alloted 80,000 bonus shares in 2007.
He sold 78,000 shares in 2007 Rs. 25,60,000. Being non listed on STT was paid on it.
Now, the question is:
1) Whether it will be considered LTCG or STCG?
2) Whether or not this profit will be available to set off business losses?
He was alloted 80,000 bonus shares in 2007.
He sold 78,000 shares in 2007 Rs. 25,60,000. Being non listed on STT was paid on it.
Now, the question is:
1) Whether it will be considered LTCG or STCG?
2) Whether or not this profit will be available to set off business losses?
03 May 2008
Dear reetika
Sale of listed shares is chargable as long term capital gain if it is hold by an assessee more than 12 months but it is exemot from tax.
In this case it is not listed shares hence it is charable to capital gain.
You mentioned that he sold the shares & not bonus shares so it is longterm capital gain & taxable at 20%
The indexation benefit also applicable to the purchase shares
Sale of listed shares is chargable as long term capital gain if it is hold by an assessee more than 12 months but it is exemot from tax.
In this case it is not listed shares hence it is charable to capital gain.
You mentioned that he sold the shares & not bonus shares so it is longterm capital gain & taxable at 20%
The indexation benefit also applicable to the purchase shares
03 May 2008
THESE BEING UNLISTED SHARES STT IS NOT ATTRACTED.
THESE BEING UNLISTED SHARES ATTRACT LONG TERM CAPITAL GAINS (BEING HELD FOR MORE THAN 12 MONTHS)TAX @ 20% WITH INDEXATION.(ASSUMING YOUR CLIENT IS AN INDIVIDUAL)
10% TAX RATE APPLICABLE FOR CAPITAL GAINS WITHOUT INDEXATION.(ASSUMED THE CLIENT IS AN INDIVIDUAL)
YOU HAVE NOT STATED WHETHER BONUS SHARES OR ORIGINAL SHARES WERE SOLD.
IT IS THE LAW THAT COST OF ACQUISITION OF BONUS SHARES IS TREATED AS NIL.SO INDEXATION WONT APPLY.
LONG TERM CAPITAL GAINs MAY BE SET OFF AGAINST BUSINESS LOSS UNDER INTERHEAD ADJUSTMENT PROVIDED , FIRST YOU MUST EXHAUST CARRIED FORWARD LOSS UNDER SAME HEAD AND THEN YOU CAN OPT FOR INTERHEAD ADJUSTMENT.
R.V.RAO
THESE BEING UNLISTED SHARES ATTRACT LONG TERM CAPITAL GAINS (BEING HELD FOR MORE THAN 12 MONTHS)TAX @ 20% WITH INDEXATION.(ASSUMING YOUR CLIENT IS AN INDIVIDUAL)
10% TAX RATE APPLICABLE FOR CAPITAL GAINS WITHOUT INDEXATION.(ASSUMED THE CLIENT IS AN INDIVIDUAL)
YOU HAVE NOT STATED WHETHER BONUS SHARES OR ORIGINAL SHARES WERE SOLD.
IT IS THE LAW THAT COST OF ACQUISITION OF BONUS SHARES IS TREATED AS NIL.SO INDEXATION WONT APPLY.
LONG TERM CAPITAL GAINs MAY BE SET OFF AGAINST BUSINESS LOSS UNDER INTERHEAD ADJUSTMENT PROVIDED , FIRST YOU MUST EXHAUST CARRIED FORWARD LOSS UNDER SAME HEAD AND THEN YOU CAN OPT FOR INTERHEAD ADJUSTMENT.
R.V.RAO
04 May 2008
But sir, i have mentioned that he sold 78,000 shares.
He had originally only 2,000 shares and was alloted 80,000 shares in the year in which sale took place. So the sold shares must be having sm share of bonus shares.
so, wht will be the exact treatment?
He had originally only 2,000 shares and was alloted 80,000 shares in the year in which sale took place. So the sold shares must be having sm share of bonus shares.
so, wht will be the exact treatment?
05 May 2008
hi reetika
as per ur information u mentioned that the shares are of unlisted Co. it wil b chargeable to capital gain as follows
1)out of total 82000 shares ( 2000 orig. + 80000 bonus)u mentioned that 78000 shs wr sold. capital gain has to be calculated on FIFo basis i.e out of 78000 shs sold it is assumed that original 2000 shs & bonus 76000 shs were sold.
3)further as per ur information 0n 76000 shs i.e bonus shs short term capital gain will arise as same were issued and sold in 2007.
sales consideration for bonus shs =(2560000/78000*76000) 2494359/-
short term capital gain = 2494359/-(as cost of acquisition for bonus shares is taken as nil.)
4) on balance 2000 shs there will be long term capital loss as follows
sales consideration(2560000-2494359)= 65464.00
less :index cost of acq.
(2500000 X 519/331) 3919940.00
long term capital loss of rs. 3854476/-
5) further as per ur querry lon term capital loss cannot be set off against short term capital gain. however business loss (other than speculation business) can be set off against short term capital gain.
as per ur information u mentioned that the shares are of unlisted Co. it wil b chargeable to capital gain as follows
1)out of total 82000 shares ( 2000 orig. + 80000 bonus)u mentioned that 78000 shs wr sold. capital gain has to be calculated on FIFo basis i.e out of 78000 shs sold it is assumed that original 2000 shs & bonus 76000 shs were sold.
3)further as per ur information 0n 76000 shs i.e bonus shs short term capital gain will arise as same were issued and sold in 2007.
sales consideration for bonus shs =(2560000/78000*76000) 2494359/-
short term capital gain = 2494359/-(as cost of acquisition for bonus shares is taken as nil.)
4) on balance 2000 shs there will be long term capital loss as follows
sales consideration(2560000-2494359)= 65464.00
less :index cost of acq.
(2500000 X 519/331) 3919940.00
long term capital loss of rs. 3854476/-
5) further as per ur querry lon term capital loss cannot be set off against short term capital gain. however business loss (other than speculation business) can be set off against short term capital gain.
05 May 2008
Thanks for ur answer!
But, what will be the treatment if the alloted shares were right issue instead of bonus issue @ Re. 1 per share?
But, what will be the treatment if the alloted shares were right issue instead of bonus issue @ Re. 1 per share?
31 March 2012
In that case the cost of acquisition of the right shares shall be Re 1 per share.
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