Tax on compensation from Investor protection Fund

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An investor received compensation from the Investor Protection Fund after their stockbroker defaulted. The initial payout covered the invested amount, with a subsequent payment reflecting the market value of shares at the time of default. The query seeks advice on how to declare these payouts, specifically the excess amount received, as long-term capital gains in the IT return for AY 22-23, noting that gains under INR 1 lakh are exempt.

KRISHNAKUMAR VEERABADRAN

KRISHNAKUMAR VEERABADRAN (Querist)
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06 July 2022 Dear Sir/Madam,

I had invested with a stock broker(BMA Wealth Creators) in various shares worth INR 2,27,738.70 (cost value) between July 2017 and September 2019. The broker was announced defaulter and expelled by NSE on 31 Oct 2019. Since all my shares were in broker's pool account, I filed a claim with NSE as per NSE notification. NSE had reviewed my claim and admitted INR 2,24,574.48 (cost value of invested amount) from Investors protection fund and paid the same in Feb 2021. NSE further reviewed the claim and recalculated the claim settlement amount adjusting for the closing market value of shares on the date of default/expulsion of the broker. The revised claim amount was considered as INR 3,12,196.65( Market value as on expulsion date) and paid the difference amount of INR 87,622.17 (3,12,196.65 - 2,24,574.48) in Nov 2021.

I request your advice as to how treat the above while filing the IT return for AY 22-23.

Please let me know if you need any further details relating to this to assist me

Note : I had not shown the settlement received for INR 2,24,574.48) in tax return for AY21-22 as there was no capital gain.

I would really appreciate your help and suggestion so I am Tax compliant.

Kindest Regards,
Krishnakumar V
Mobile : 9840847698