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Capital gains treatment for gifted shares

Siddharth Desai (IT Professional) (31 Points)

05 January 2012

Hello,

My father transferred shares to me of several companies in Jan 2008 as a gift. At that time the value of the shares were about Rs5.36 lacs. I would like to sell some shares now. However, before doing that I wanted to understand what is the capital gains implication of this.

How would the cost of acquisition be considered?

a) Value of shares in Jan 2008 when they were transferred to me?
b) Value of shares when my dad acquired them?
c) Rs. 0
d) Something else?

Also I don't plan to sell all - just a fraction. But considering I would like to sell them all eventually in life I need to know the answer to this question.

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6 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 January 2012

COA would be b) as mentioned by you i e the cost in hands of original person who acquired the shares.

Siddharth Desai (IT Professional) (31 Points)
Replied 05 January 2012

Originally posted by : U S Sharma

Thanks U S Sharma. Unfortunately it is not the answer I was hoping for. Is there any chance you can point me to the relevant clause in the act (or web link) that says this is the case? Reason I'm asking is that my dad in turn got the shares from me a long time ago (when I went to the US for a number of years) and returned them to me after once I returned. If I have to have calculate the buy cost when I first aquired it, I probably don't have records for that either (probably goes pre-year 2000).

Also, what happens if it is impractical for any reason to communicate with the gifter when the gifter acquired the shares? E.g. gifter himself doesn't have records.

Can't I just consider cost value as Rs 0?

Since it is long term currently for equity there is no tax so I wanted to get rid of some/most of the stocks as I didn't want to keep it but didn't dispose them until now because I didn't know the answer to this question. Now with potentially DTC coming in next or future years, purchase cost will become important so I wanted to close this while DTC is not yet in effect.

COA would be b) as mentioned by you i e the cost in hands of original person who acquired the shares.

CA Neil Ganatra (Partner - Gautam Joshi & Co.) (871 Points)
Replied 05 January 2012

Dear Sid,

I have attached herewith the section 49 which deals with the cost of acquisition in some special cases. You can go through that.

Further, it will not be advisable to take cost as Rs. 0 as it will result in furnishing incorrect data and excess income though tax free. In your case, you will have to take purchase price that you paid as COA. If all the shares are in demat account then you will easily get the purchase price or if you have the purchase dates you can search for the price on that date online or you can ask to your current dealer too.