Capital gain on shares and securities received from father g

Originally posted by : ravi
	Dear Friends, I would like to know, how capital gain will be computed where an assessee received shares as gift (without any consideration) from father. what would be the period of holding for ascertaining whether it is long term and short term Capital Gain or Loss. and what would be cost of acquision at the time of sale?? Please Reply, as soon as possible. Thanks and regards Ravikant verma

Hi Ravi,

This is very simple.

shares, debentures, bonds are financial assets. Financial assets takes one Year as short term and < 1 year as longterm. If the assessee Sells any financial which he bought one year back, it is a long ter asset. any income from that is treated as LTCG and vice versa.

If the Financial Asset is bought after 1/4/1981 the Cost of acuqision is taken as NIL. This applies for the ppl who gets financial assets as gifts. If the asset is gift for the assessee, we shall refer to the previous owner for the cost of acquisition. The COA to the previous owner is taken to be nil being the financial asset. Therefore, COA for the assessee is NIL.

Pl let me know if you have any other doubts on this

Regards

Vignesh

Dear Vignesh,

Financial assets are those assets which are received as either bonus shares or right shares or just rights.

 

Dear Ravi

Any transfer by way of gift is not considered as transfer u/s 47 of IT act. Hence, transfer by father to son is not considered as transfer.

Also, The COA to the son is the COA to the previous owner who last bought that asset for consideration  (father).

The period of holding is computed from time it was last held by the previous owner i.e father.

 

Sales - cost of transfer - COA = Capital Gains.

 

To be noted:-

1.If STT is applicable, then LTCG on equity shares exempt u/s 10(38)

2. If not, then STCG taxed at 15% flat

3. STT not deductible as cost of transfer

Mr.Vignesh, I beg to differ from your views in this regard. Gift is an exempted transfer so no capital gains arises in hands of father for the shares gifted to his son. Also section 56(2)(vii) is not attracted as this is the case of gift received from "relative". So no taxability arises in hands of the son either. Moreover the cost of acquisition of these shares for son will be the cost at which they were acquired by the father. And period of holding shall include the period for which the shares were held by the father.

Dear Ravi

Any transfer by way of gift is not considered as transfer u/s 47 of IT act. Hence, transfer by father to son is not considered as transfer.

As per Sec49(1) , if any assessee has acquired an asset by certain specified mode such as gift,will......etc then cost to the previous owner shall be adopted as the COA

As per Sec2(42A)  in determining period of holding ,the pd. for which the previous owner held the asset should also be taken into consideration.

But for availing indexation, benefit indexation is done only from the first year in which the assessee  has held the asset and not from the year of acq. by the previous owner

Many many thanks to all of you. Mr.Vignesh created doubt, but after many uses have suggested the same things this concept is clear.