Amarjeet Kaur (self employed) (108 Points)
26 April 2022Sir,
Reliance Industries Limited recently came with a Rights Issue of Shares. The Issue was completed in various instalments in 2020-21. Is there any incidence of STCG on those who subscribed to the rights issue by timely paying the instalments over a period & finally received fully paid shares in 2021, although they did not sell any of these shares ? If so how it will be shown in relevant Schedule of the ITR - 2
Kev Men
(756 Points)
Replied 27 April 2022
Since you have received fully paid up shares due to the subscripttion of rights issue, there is no capital gains. Capital gains will arise when you sell the fully paid shares.
Amarjeet Kaur
(self employed)
(108 Points)
Replied 29 April 2022
Dear Kev Men Sir,
But sir, I have received a Capital Gains Statement from my Broker viz. Religare Broking Ltd., which shows inter alia, a Short term Capital Gain of Rs. 803.70 earned by me on allotment of 19 partly paid shares and then its conversion in fully paid shares, in two different transactions.
Kev Men
(756 Points)
Replied 29 April 2022
When the partly paid shares are converted into fully paid shares, the partly paid shares are removed from the demat and fully paid shares are put in the demat. This is because of different ISIN of partly and fully paid shares. The broker has recorded the same. However as per the Income Tax Act, capital gain will arise when you sell the fully paid shares and you will be needed to consider the cumulative costs paid as cost of acquisition. The holding period will be from the original day you acquire the partly paid shares.
Also as per the 'real income' principle, tax should be levied on income which are actually earned.
My view is that the conversion will not be taxable although it shows in the broker's statement. Differing views with relevant explanations are welcome.
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