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Calculate gains - Selling shares after de-merger

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Rajesh

297 Points Posted on 18 January 2020

Respected Sir/Madam,

I sold shares of companies A & B. However B shares were allotted to me recently due to de-merger between A & B.

'A' company's shares had been there for over 2 years. However after de-merger A's price got corrected from say 200 Rs to 100 Rs.

However effectively my total stock valuation (A + B) was still same because B's proportionate shares got allotted to me may be as per their company decision.

How do I handle this situation in tax computation? Will gains from A & B be still calculated based on their 31-Jan-18 price? 'A' will then appear as significant loss.

Any clarity on this situation would be great to know.

Thanks and regards. Rajesh

Replies (2)

Quick Summary

This discussion addresses how to calculate capital gains tax when selling shares of companies involved in a de-merger. The user received new shares (Company B) due to a de-merger from their original holdings (Company A). The key question is how to determine the cost basis and calculate gains, especially when the original company's share price dropped post-demerger. Guidance suggests following the de-merger allotment letter for share prices and that the grandfathering benefit as of 31st January 2018 can be claimed, considering the de-merger ratio for profit/loss calculations.