Rahul Bansal (article assistent) (36 Points)
23 June 2011If a company cancels its old shares of Rs.10/- face value and issues new shares of face valve of Rs2/- and accordingly give 5 new shares to its shareholders for each old share held then whether capital gain will arise in hands of shareholder ??
Please give reference also along with your opinion.
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 23 June 2011
| Originally posted by : Rahul Bansal | ||
 |
If a company cancels its old shares of Rs.10/- face value and issues new shares of face valve of Rs2/- and accordingly give 5 new shares to its shareholders for each old share held then whether capital gain will arise in hands of shareholder ?? Please give reference also along with your opinion. |
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1*10=10
5*2=10
no real time effect in value of shares, just numbers get increased due to split, so no capital transaction taken place, valuation is same as investment value.in original.
Sohil
(Learner)
(631 Points)
Replied 23 June 2011
Now take example of titan.
Yesterday i bought 1 share for 4300.today share gave bonus plus splitted.Now i own 20 shares at 215 price.Now what will be the purchase price of the share.
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 23 June 2011
| Originally posted by : Magnet | ||
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Now take example of titan. Yesterday i bought 1 share for 4300.today share gave bonus plus splitted.Now i own 20 shares at 215 price.Now what will be the purchase price of the share. |
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4300 /10 = 430 per share ( split ratio is 1:10)
bonus shares are zero priced for capital gain purpose.
Sohil
(Learner)
(631 Points)
Replied 24 June 2011
| Originally posted by : U S Sharma | ||
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Originally posted by : Magnet Now take example of titan. Yesterday i bought 1 share for 4300.today share gave bonus plus splitted.Now i own 20 shares at 215 price.Now what will be the purchase price of the share. 4300 /10 = 430 per share ( split ratio is 1:10) bonus shares are zero priced for capital gain purpose. |
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That way bonus is beneficial because suppose i sell all shares at 300 price now i can book loss in short term whereas actually what i am making is STCG,
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 24 June 2011
bonus shares are beneficial, if you keep them for long term.
ur cost of share is 430 and you are selling @ 300 so you are making stcl @ 130, it can be carried forward or adjusted against other STCG
people love to have bonus shares in hand for long term, as the cost of acquisition is ZERO, so whole the consideration get exempted under incometax without any hassle, against only stt payout.
Sohil
(Learner)
(631 Points)
Replied 24 June 2011
Thanks got it,
But you said for long term people like it because cost of acquisition is zero.
But suppose the main share also if i keep long for say atleast more than a year ,Price of acquistion is 215 or zero doesnt matter as the profit on long term is tax exempted.
Am i right?
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 24 June 2011
main share price is 430, not 215 so people prefer to dispose the original shares after bonus and book stcl, adjsut the same with stcg then enjoy the benefit of zero valued bonus shares.
suresh
(article)
(247 Points)
Replied 24 June 2011
When old shares face value chages against new shares then value for shares chages bonus share are not chargeble to capital gain tax they are taxfree.
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