Capital gains on sale of equity shares (of pvt ltd co.)

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This query is : Resolved

Shruti Mishra (Querist)

28 June 2014 Dear expert,

Individuals (Directors) have 49% of shares in AB pvt company and rest of the shares are held by XYZ pvt co.

Both have transferred the shares to purchasers at long terms profits. ( thus Management controlled also transferred)

Please advice tax implications / exemptions available for both - individuals & AB pvt co. With legal backing.

Nikhil Kaushik

Nikhil Kaushik (Expert)

28 June 2014 1. as long as the shares are sold at the FMV computed under Rule 11U/11UA, there are no implications for the buyer.

2. with regards to the sellers, the transaction is a simple long term capital asset chargeable to tax. you need to compute the indexed cost of the shares and deduct the same from the consideration to arrive at LTCG. the same shall be then taxed at 20%.

Rupesh Jain

Rupesh Jain (Expert)

28 June 2014 profit on sales of shares calculate under the capital gain head if it hold more than 12 month then calculate long term capital gain. as follows:
sales proceeds - purchase price X selling year index /purchase year index = gain on sales of shares.
it is taxable @ 20% .

shares holding period less than 12 month then calculate short term capital gain and indexation benefit not available. and gain include in your income tax will pay accordingly .

assesse in long term case can take benefit u/s 54F for residential house.

Shruti Mishra

Shruti Mishra (Querist)

28 June 2014 The above is good for individuals. What abt the tax implications for AB pvt ltd selling the shares?

Pl suggest

Nikhil Kaushik

Nikhil Kaushik (Expert)

28 June 2014 the capital gains computation remains same for company too.

the deduction is available only under section 54EC

Shruti Mishra

Shruti Mishra (Querist)

28 June 2014 Thank you Kaushik sir..

Nikhil Kaushik

Nikhil Kaushik (Expert)

28 June 2014 You are welcome Mishra..