FIFO Method and Bonus Shares
This query is : Resolved
26 June 2010
I am offering my income from shares as business income in the income tax reutrn.
I have bought 100 shares of say X company. Then i receied 1:5 bonus. My total holding is 600. I sold 300 beofre 31.03.2010 and as on 31.03.2010 i am having 300 as closing balance.
Now I am using FIFO method for valuation. As these 300 closing balance is out of 500 bonus shares, there cost is zero and closing valuation is substatially on the lower side and accrdignly my profit.
Is this treatmet correct bonus shares or otherwise i have to use average cost under any rule/ act which will increase my closing valuation and profits.
I have bought 100 shares of say X company. Then i receied 1:5 bonus. My total holding is 600. I sold 300 beofre 31.03.2010 and as on 31.03.2010 i am having 300 as closing balance.
Now I am using FIFO method for valuation. As these 300 closing balance is out of 500 bonus shares, there cost is zero and closing valuation is substatially on the lower side and accrdignly my profit.
Is this treatmet correct bonus shares or otherwise i have to use average cost under any rule/ act which will increase my closing valuation and profits.
26 June 2010
Your valuation method is correct and needs no rectification and valuation should be on FIFO only.
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