Company X, whose shares are listed in a stock exchange since 1985, has two divisions, A and B. It demerges its division B into a new company Y on 1.1.2019. Shares of company B get listed in a stock exchange very soon thereafter.
Shareholders of X before demerger are allotted one share of Y without any further payment, for every share held in X as on 1.1.2019. Under Section 49(2C) of the Income-Tax Act, the assets of X before the demerger transferred to Y are 30%, with the balance 70% of the net assets being retained by the residual X.
A person held 10 shares of X before 1.1.2019 which he had bought for a total amount of Rs 2,500/-. So after 1.1.2019, he holds 10 shares each in X (the residual company) and 10 shares in Y. After the demerger, his cost of acquisition in the residual company X would be Rs 2,500/- x 70% = Rs 175/- per share of the residual company X, and the cost of acquisition in company Y would be Rs 75/- per share.
If the shareholder sells his 10 shares in company B on 1.4.2020 at Rs 160/- per share through a stock exchange, what would be his LTCG on this sale?
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