Taxability of Bonus Shares

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This discussion clarifies the taxability of bonus shares, particularly for Reliance Petroleum Ltd. shares converted to Reliance Industries. The advice suggests treating bonus shares as having zero cost of acquisition. The original purchase price of the Reliance Petroleum shares will be used for calculating capital gains. For sales made after January 31, 2018, capital gains are computed under Section 112A of the Income Tax Act, using a revised cost of acquisition that considers the higher of the actual cost or the lower of the fair market value on January 31, 2018, and the sale consideration.

sanjay

sanjay (Querist)
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07 March 2020 Sir
I would like to take advise on the taxability of Bonus shares.
I had purchased shares of Reliance petroleum ltd @1744/ but it has been converted in Reliance Industries and issued 224 shares. In 2009. It has given 224 shares as bonus in 2010. What will be purchase price.? I have sold 448 shares in 2020. How the capital gain be calculated.
Pl advise.
Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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08 March 2020 Consider zero cost in respect of bonus shares.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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08 March 2020 The cost of acquisition of the converted shares shall be deemed to be the cost paid for the shares of Reliance Petroleum Ltd.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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08 March 2020 Capital gains is to be computed u/s 112A of the Income tax Act,1961. The methodology ,in brief, is as under.

Capital gain = Sale value minus revised cost of acquisition

Revised cost of acquisition is :-
1. the higher of the actual cost of acquisition and

2. lowest of :-
* fair market value as on 31-01-2018,
* full value of the consideration.

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