In respect to some of the equity investments in listed companies made by me, both through primary and secondary markets, I am planning to exit from some of them via by market sale route. For LTCG tax calculation purpose, the original or actual cost of acquisition of shares has to be taken into account. However, I do not have the record of the original price of these shares. Also, some companies have issued bonus shares in between.
Will you please clarify how to source the original prices of the shares and what value is to be taken in respect of bonus shares for this purpose?
As per Section 48 of the Income Tax Act, 1961 (‘The Act’); the income chargeable under the head “Capital gains” shall be computed, by deducting the expenses incurred on transfer and & the cost of acquisition and cost of improvement thereto, from the full value of the consideration received or accruing as a result of the transfer of the capital asset.
As per section 112A of the Act, Long term capital gain (LTCG) in excess of ₹100,000 earned from sale of listed shares are chargeable to tax at the rate of 10 per cent. Surcharge (if applicable) and health & education cess at 4 per cent shall apply additionally.
Where the shares are purchased before January 31, 2018, the cost of acquisition shall be higher of the following: actual cost of acquisition; or lower of (i) fair market value (FMV) of such share on January 31, 2018 (highest quoted price) or (ii) full value of consideration as a result of transfer.
We understand that the shares are listed on a recognised stock exchange in India. You can request your stock broker to provide the cost of acquisition of these shares and the traded value of your listed shares as on January 31, 2018 to determine the cost of acquisition for LTCG workings.
Where the actual acquisition cost of these shares is not available, you may consider the FMV as on January 31, 2018. Further, the actual cost of acquisition for bonus shares shall be NIL for the purpose of computing LTCG.