Cost of Acquisition of old listed shares inherited for LTCG

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When inheriting listed shares purchased before 31st January 2018, and the exact acquisition cost is unknown due to dematerialisation, you can use the Fair Market Value (FMV) as of 31st January 2018 as the cost of acquisition for calculating Long Term Capital Gains (LTCG). This is permissible even if the actual cost was higher or lower, and is generally accepted by tax authorities and professionals.

sumit

sumit (Querist)

03 July 2023 A client has inherited listed shares from his brother. All these shares were purchased before 31st Jan, 2018 but exact date of acquisition and cost of acquisition is not available as many of these shares were earlier held in physical form and later dematerialized.

What should be shown as the cost of acquisition in case some shares have now been sold by the client? Can we consider FMV as on 31st Jan, 2018 also under cost of acquisition or any guidance available under the Act?

If anyone has dealt with such case practically then please advise.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 July 2023 Yes, you can consider FMV as on 31 Jan., 2018 as COA, if STT was paid while selling the shares.

sumit

sumit (Querist)

03 July 2023 Thank you Sir for your reply. Could you please clarify if there’s any specific clause/rule or any case law to support this?

Appreciate your support

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 July 2023 Assessee is at liberty to choose higher of the COA from actual cost or the FMV as on 31st Jan 2018. Here say, even if you have paid higher price but you wish to claim lower cost as on 31st Jan; which should be acceptable. In case the actual cost were lower then the said FMV, then also it is acceptable. In either case the principle is well accepted by department and professional. So, none other supporting evidence required.

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sumit

sumit (Querist)

03 July 2023 Thank you Sir for your prompt response. Appreciate your help.

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

03 July 2023 You are welcome.

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