SLBM and Income Tax

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This discussion clarifies how lending shares under the Securities Lending and Borrowing Mechanism (SLBM) impacts capital gains tax. It explains that lending shares doesn't constitute a taxable transfer. When shares are sold, the 'first in, first out' (FIFO) principle applies to determine the acquisition cost, meaning shares bought earlier are considered sold first, regardless of whether they were lent or held directly.

ARUN BATRA

ARUN BATRA (Querist)

19 October 2025 As per the established procedure, the capital gains on sale of shares are determined on the basis of "first in first out" and period of holding
Now the query. I have 100 shares of a company ABC purchased in 2 lots of 50 each, first @ Rs 500 each and second @ Rs 600 each. I lend 50 shares under SLBM mechanism and sell the balance 50 @ Rs 1000 each. Do I calculate the capital gain using acquisition cost of Rs 500/ shares (lent under SLBM) or Rs 600/ share (held by me in my demat account and actually sold)

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

20 October 2025 SLBM does not change the underlying ownership of the lent shares—lending shares under SLBM is not considered a transfer for capital gains purposes. The shares are only considered "transferred" for tax purposes when they are actually sold.
When you sell 50 of your 100 shares, according to FIFO, these will be considered to be from Lot 1 (those bought @ ₹500 each), as these were acquired first.

ARUN BATRA

ARUN BATRA (Querist)

20 October 2025 Thanks for your prompt reply

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

20 October 2025 You are welcome...

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