Tax treatment on demerger

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ujjwal kumar (Querist)

31 January 2012 Sir i have bought 100 share of indiabulls real estate share @142 on 3/4/2011. This company get demerged with indiabulls wholesale service ltd on may11 and give 1share for each share held. Again on dec11 the company demerged with indiabulls infra and power ltd and given 2.95 share for every original share held...
Now my question is that what is cost to be considered if all share is sold on jan 12?? What is taxation and accounting treatment??
Plz reply me as soon as posible...
Thanks

Prof. Bajaj

Prof. Bajaj (Expert)

03 February 2012 In my opinion, if you are selling all the shares, then even the simple formula of (Total Sale Amount - Total Purchase amount) can give you the STCG on which you need to pay 15% tax.

If you are not selling all the shares, then one of the options you have is:

1. Consider Acquisition cost of Indiabulls Real Estate as Rs. 142 and subtract it from the sale price to arrive at the gains.

2. Consider Acquisition cost of other entities as 0 and the sale amount will be profit.

There could be few more options wherein you can carry out some complex calculations for higher precision. Depends on how much is the amount and is it worth that much effort.

ujjwal kumar

ujjwal kumar (Querist)

04 February 2012 Some person say cost of new share will be deducted from original share and then sale -purchase is stcg. But how to drduct because i have received 2 type of new share on different month first is indiabulls wholesale service ltd and 2nd is indiabulls infra and power ltd share .so plz clerify what is cost to be considered for each share...
Thanks..

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