Capital Gain Tax on Gifted Shares

Let's break down the capital gain computation and tax implications:

Capital Gain Computation For the 1000 shares you purchased 2 years ago: - Capital gain will be computed based on the price at which you purchased the shares 2 years ago. -

Holding period: 2 years (long-term capital gain) For the 1000 shares gifted by your granddaughter: -

Capital gain will be computed based on the price at which your granddaughter purchased the shares 6 months ago. -

 Holding period: 6 months (short-term capital gain), but since you're the recipient of the gift, the holding period will be considered from the date of the gift (i.e., the last week). -

However, as per Section 49(1) of the Income-tax Act, 1961, in case of a gift, the cost of acquisition will be the cost of acquisition of the previous owner (your granddaughter).

Tax Implications on You - Long-term capital gain (1000 shares purchased 2 years ago): 10% or 20

Thanks Ramaji for the response.

After receipt of gift from my grand daughter, I have 2000 shares. Now, if I sell 1000 shares,  will I need to pay long term capital gain tax or short term capital gain tax? In other words, will the FIFO principle be applied for compuation of capital gain tax ?

Invest in capital gain bonds or house property.

You are correct. FIFO rule is applicable for dematerialized shares.

Refer: CIT vs. Arun Bhagwandas Chandak (2012)