05 December 2014
dear sir, if bonus shares received before 1.04.1981 then what will be the treatment at the time of sale in case of listed & unlisted equity shares?
18 July 2024
If bonus shares were received before 1st April 1981, the tax treatment at the time of sale depends on whether the shares are listed or unlisted. Here’s how it generally applies:
### Listed Equity Shares:
For bonus shares received before 1st April 1981 and subsequently sold:
1. **Cost of Acquisition:** The cost of acquisition of the original shares (for which bonus shares were received) is determined based on the Fair Market Value (FMV) as on 1st April 1981 or the actual cost, whichever is higher.
2. **Treatment at Sale:** - **Long-Term Capital Gain:** If the shares (including bonus shares) are held for more than 12 months, the gain on sale is considered a long-term capital gain. - **Tax Rate:** For listed equity shares, the long-term capital gains tax rate is currently 10% without indexation benefit or 20% with indexation benefit, whichever is lower.
### Unlisted Equity Shares:
For unlisted equity shares received before 1st April 1981 and subsequently sold:
1. **Cost of Acquisition:** Similar to listed shares, the cost of acquisition of the original shares (for which bonus shares were received) is based on the FMV as on 1st April 1981 or actual cost, whichever is higher.
2. **Treatment at Sale:** - **Long-Term Capital Gain:** If the shares (including bonus shares) are held for more than 24 months, the gain on sale is considered a long-term capital gain. - **Tax Rate:** For unlisted equity shares, the long-term capital gains tax rate is currently 20% with indexation benefit.
### Indexed Cost of Acquisition:
- For shares acquired before 1st April 1981, the government allows you to calculate the indexed cost of acquisition using the cost inflation index (CII) for the relevant years. This helps adjust the cost base to account for inflation and reduces the taxable gain.
### Documentation and Records:
- It is crucial to maintain records of the acquisition of shares, including bonus shares received, and compute the cost of acquisition accurately. - In case of any discrepancies or specific queries, consulting a tax advisor or chartered accountant would be advisable to ensure compliance with current tax laws and regulations.
### Conclusion:
The tax treatment for sale of bonus shares received before 1st April 1981 depends on whether the shares are listed or unlisted. The cost of acquisition is determined based on the Fair Market Value as on 1st April 1981 or actual cost, and the gains on sale are taxed as long-term capital gains, with different tax rates and benefits depending on the type of shares (listed or unlisted).
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