Taxation on Shares
This query is : Resolved
21 December 2007
There is a company which has announced a scheme of arrangement.
As per the scheme each share of Rs.10/- will get reduced to 1 share of Rs.2/- and then 5 shares of Rs.2/- each will be consolidated to 1 share of Rs.10/-
Suppose an investor has 100 shares of Rs.10/-.The shares will first get reduced into 100 shares of Rs.2/- each and then they will be consolidated into 20 shares of Rs.10 each.At this stage there will be no capital gains tax liability.
How to compute the capital gains when a part of the newly converted 2 0shares are sold ? What should be the Cost of Acquisition ?
As per the scheme each share of Rs.10/- will get reduced to 1 share of Rs.2/- and then 5 shares of Rs.2/- each will be consolidated to 1 share of Rs.10/-
Suppose an investor has 100 shares of Rs.10/-.The shares will first get reduced into 100 shares of Rs.2/- each and then they will be consolidated into 20 shares of Rs.10 each.At this stage there will be no capital gains tax liability.
How to compute the capital gains when a part of the newly converted 2 0shares are sold ? What should be the Cost of Acquisition ?
S.Srinivasaraghavan
(Expert)
21 December 2007
The cost of aquisition does not under go a change due to the said arrangement. Suppose you had acquired the said 100 shares at Rs 1000. The cost of acquisition will continue to be the same for the 20 shares now you possess after the aarangement. If you sell the 20 shares at a total price of Rs 1100,then the capital gain will be Rs 100.
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