Capital Gain Tax on Gifted Shares

Tax queries 217 views 4 replies

Manoj Verma

Vice President

29 Points Joined December 2020

I have 1000 shares of ONGC, purchased 2 years ago. My grand daughter ( my son's daughter) has gifted me further 1000 shares of ONGC last week, which were purchased by her 6 months ago. I want to now sell the 1000 shares of ONGC. I want to understand how the capital gain will be computed on sale of these 1000 shares. Will the capital gain be computed based on: (a) price at which I purchased 2 years ago, OR (b) the capital gain will be computed based on the price at which my grand-daughter purchased the shares 6 months ago? Also, what will be income tax implications on my grand daughter due to gift to me and sale of shares by me? Thanks

Replies (4)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9045 Points Joined December 2011

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

Manoj Verma

Vice President

29 Points Joined December 2020

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 ?