Capital gain tax liability on unlisted shares

Shares Purchased in 1992 – 3000 at Rs. 10 per share – Total cost Rs. 3000

Shares Sold in 2019 for Rs. 292000

Two options:

1. Take Rs. 3000 as cost and apply indexation with the base year as 2001-02 i.e. 100 and 280 for 2018-19 which will give cost inflated cost of Rs. 8400
2. Take FMV of shares on 2001-02 as cost and apply indexation with the base year as 2001-02 i.e. 100 and 280 for 2018-19. This will be difficult to prove since shares are unlisted unless they were listed in 2001-02

On 1st option, long term capital gain is Rs. 289000. A tax of 20% + Cess has to be paid on this

Hi,

Since the shares were acquired before 1.4.2001, you need to get the FMV of the shares as on 1.4.2001. You can get tje valuation done for the shares from a registered valuer. We can help you in getting the valuation report 

Your entire capital gain and taxes thereon would depend upon the valuation of shares on 1.4.2001.

Another option would be to take cost of shares as FMV on 1.4.2001 amd apply indexation. In that case, you capital gain would be around 2 lacs and tax thereon would be 20% plus cess. Considering the quantum , this approach seems more practical.

Dear Sir,

Hope you are doing well !!

As the date of acquisition of share falls prior to 1 April 2001, you have a choice to consider the Fair Market Value (FMV) of the shares as on 1 April 2001 as your acquisition cost. 

So, firstly you need to get the valuation report of shares as on 01.04.2001.

We can help you in getting the FMV of the shares as on 1.4.2001

However, form taking the original cost, there will a long term capital gain of Rs.2,08,000.

It is calculated as below:

Sale consideration -Indexed COA= (Rs 2,92,000- Rs 84,000)= Rs. 2,08,000.

The indexed COA= Rs 30000 /100*280=Rs. 84,000

The capital gain will be taxed at 20.8% i.e. 20.8% on Rs 2,08,000.

We may assist you in ITR filing & entire procedure.

It is advisable to take a phone consultation for detailed discussion.

You need to first find the value of shares on 01.04.2001.

Second do let me know if they are listed or unlisted shares then I can help you calculate capital gain.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Get fair maket value  as on 01.04.2001 as per  rule 11UA  r.w. section 55 you can avail indexation benefit LTCG tax @20% in your case.

You will need the FMV of shares as on 1 April 2001. This will be indexed. Sale value less indexed cost will be the capital gain. This Capital gain will be taxed at 20.4%

you may refer this article for calculating FMV

https://taxguru.in/income-tax/method-calculate-fmv-unquoted-shares.html

Hello,

Since the shares were acquired before 1st April 2001, you can consider the FMV of the shares as on 1st April 2001 as the cost of acquisition of the shares. This cost would then be indexed until the year of sale of shares. The net figure of the sale consideration and the indexed cost of acquisition would be your Long Term Capital Gain taxable at 20% plus cess.

I hope this answer satisfies your requirements.

Regards,

CA Hunny Badlani

Hi

The LTCG arising from transfer of unlisted shares, whether in demat form or physical form, after holding them for a period of more than 24 months, shall be chargeable to tax at the rate of 20 per cent with indexation.

for computing capital gains in respect of an asset acquired before 1st April, 2001, the assessee has been allowed an option of either to take the fair market value of the asset as on 1st April, 2001 or the actual cost of the asset as cost of acquisition.

Calculation of capital gains is sales consideration less cost of transfer less indexed cost of acquisition.

Indexed Cost of acquisition RS. 30000*280/100 = RS. 84000.

Long term capital gains is rs. [deleted] = rs. 208000.

Long term capital gains tax will be 20.8 % of rs.208000 

For more details discussion feel free to contact us.

It will be Capital gain so indexed value will be derived based on the underlying value of the shares as on 01.04.2001 else without indexation you can pay directly tax @ 10% on the differential value i.e. Rs. 2,89,000/- + Surcharge or cess as may be applicable

- As the shares were purchased before 01.04.2001, cost of acquisition may be considered actual cost (i.e.Rs.10) or FMV as on 01.04.2001 whichever is higher. FMV is net book value of share as on 01.04.2001. Obtain the balance sheet of the company as on 31.03.2001 to determine the NAV.

- Tax rate is 20%.