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Capital Gain Tax on Gifted Shares

Manoj Verma (Vice President) (24 Points)

08 January 2025

I have 1000 shares of ONGC, purchased 2 years ago. My grand daughter ( my son's daughter) has gifted me further 1000 shares of ONGC last week, which were purchased by her 6 months ago. I want to now sell the 1000 shares of ONGC. I want to understand how the capital gain will be computed on sale of these 1000 shares. Will the capital gain be computed based on: (a) price at which I purchased 2 years ago, OR (b) the capital gain will be computed based on the price at which my grand-daughter purchased the shares 6 months ago? Also, what will be income tax implications on my grand daughter due to gift to me and sale of shares by me? Thanks

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (5877 Points)
Replied 08 January 2025

Let's break down the capital gain computation and tax implications:

Capital Gain Computation For the 1000 shares you purchased 2 years ago: - Capital gain will be computed based on the price at which you purchased the shares 2 years ago. -

Holding period: 2 years (long-term capital gain) For the 1000 shares gifted by your granddaughter: -

Capital gain will be computed based on the price at which your granddaughter purchased the shares 6 months ago. -

Holding period: 6 months (short-term capital gain), but since you're the recipient of the gift, the holding period will be considered from the date of the gift (i.e., the last week). -

However, as per Section 49(1) of the Income-tax Act, 1961, in case of a gift, the cost of acquisition will be the cost of acquisition of the previous owner (your granddaughter).

Tax Implications on You - Long-term capital gain (1000 shares purchased 2 years ago): 10% or 20

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Manoj Verma (Vice President) (24 Points)
Replied 08 January 2025

Thanks Ramaji for the response.

After receipt of gift from my grand daughter, I have 2000 shares. Now, if I sell 1000 shares, will I need to pay long term capital gain tax or short term capital gain tax? In other words, will the FIFO principle be applied for compuation of capital gain tax ?