Capital; gain calculation

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vinod kumar (Querist)

08 June 2015 Please anybody suggest me in Capital Gain calculation when Preference shares are converted into equity shares with case law? 1) What is Period of Holding?
2) What is the effective date for calculation of capital gain.
3) Can we take indexation Benifit?
4) what is Cost for Indexation ?

Amol S Joglekar

Amol S Joglekar (Expert)

08 June 2015 01. The period for which the preference shares are held by the assessee shall be reckoned as period of holding.

02. The date on which the shares are converted is to be taken as the date of transfer

03. Indexation benefit can be availed for long term capital gain.

04. The cost at which the preference shares are bought (normally face value) shall be cost of indexation.

vinod kumar

vinod kumar (Querist)

08 June 2015 Please elobarate with a example

Amol S Joglekar

Amol S Joglekar (Expert)

08 June 2015 Please make it other way round.

You elaborate your query so that it can be answered more precisely.

vinod kumar

vinod kumar (Querist)

08 June 2015 Suppose
I invested in 1000 convertible preference shares of Rs.100 each in 01/06/2009 and company converted preference shares into Ordinary equity shares of Rs.100 each of Fair market value of Rs.300 on 01/06/2013 and those equity shares are sold for Rs.500 in 01/12/2014.

SO please explain the capital gain calculation for this.

& Whether Period of holding would be taken as from the date of aquiring preference shares or conversion of preference shares into equity shares?

Amol S Joglekar

Amol S Joglekar (Expert)

10 June 2015 01. The first capital gain arises on 01/06/2013, since the preference shares are extinguished. Assuming that 1000 equity shares are received in lieu of 1000 preference shares. The capital gain shall be computed as usual.Indexation benefits can be taken. Cost 1,00,000, full value of consideration 3,00,000

02. On 01/12/2014, capital gain would arise.
Cost 3,00,000 and full value of consideration 5,00,000. (Long term capital gain for equity shares is exempt if period of holding is more than 12 months, subject to, however satisfying the other condition viz Security Transaction Tax being paid)

vinod kumar

vinod kumar (Querist)

13 June 2015 Suppose
I invested in 1000 convertible Debentures of Rs.100 each in 01/06/2009 and company converted Debentures into Ordinary equity shares of Rs.100 each of Fair market value of Rs.300 on 01/06/2013 and those equity shares are sold for Rs.500 in 01/12/2014.

So please explain whether this calculation is different from preference shares conversion as said above?

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