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Cost of acquisition of share?

25 April 2023

I held very old physical shares somewhere from 1995. Remained physical due to death of 1st holder. Got it demat in April 2022. And sold it in May 2022. What will be cost? And what will be gain or loss on sale ?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160976 Points)
Replied 25 April 2023

Get the Fair Market Value of the shares on any exchange as on 31.01.2018 from ...

https://finlib.in/fair-market-value-31-jan-2018/

The FMV you can take as COA, provided it is less than your current price of share.

1 Like

Dinesh Panchal (156 Points)
Replied 25 April 2023

Thank you 🙏🙏

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160976 Points)
Replied 25 April 2023

My Pleasure.

1 Like

B Durga Prasad (Student) (175 Points)
Replied 25 April 2023

To calculate the cost of acquisition of shares, you need to consider the fair market value of the shares as on 31st January 2018, as per the cost inflation index (CII) for the year of sale.

Assuming you are a resident individual, for the financial year 2021-22 (AY 2022-23), the CII value is 317.

So, to calculate the cost of acquisition, you need to:

Find the fair market value of the shares as on 31st January 2018. You may refer to the historical prices available on the stock exchange website or consult a registered valuer for the same.
Apply the CII value of 317 for the financial year 2021-22 to adjust the fair market value to its present value.
Add any expenses incurred in acquiring the shares such as brokerage, commission, stamp duty, etc.

The resulting amount will be considered as the cost of acquisition of the shares.

Once you have determined the cost of acquisition, you can calculate the capital gain or loss on sale by deducting it from the sale value of the shares. If the sale value is higher than the cost of acquisition, you will have a capital gain, and if it is lower, you will have a capital loss. The capital gain or loss will be taxed as per the applicable tax rates.

Note that if you do not have evidence to establish the fair market value of the shares as on 31st January 2018, you may consider the fair market value of the shares as on 31st January 2018 as the cost of acquisition. In that case, your capital gain will be calculated based on the sale value of the shares minus the fair market value of the shares as on 31st January 2018, adjusted for inflation using the CII value for the financial year of sale.

For more detailed information, visit Swipe Blogs

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Dinesh Panchal (156 Points)
Replied 25 April 2023

Thank you 🙏🙏

1 Like

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160976 Points)
Replied 25 April 2023

As per sec. 112A of IT act..... the benefit of inflation indexation of the cost of acquisition is not available for the purpose of calculating LTCG on equity shares or equity-oriented funds.

Capital gain tax under section 112A will be levied provided the below-mentioned conditions are fulfilled:

Sale of equity shares and equity-related instruments like units of a mutual fund and units of a business trust.
The securities should be long-term capital assets i.e. having more than 1 year of holding.
Capital gain is exceeding Rs.1 lakh.
The transactions of purchase and sale of equity shares are subject to STT (Securities Transaction Tax). In the case of equity-oriented mutual fund units or business trusts, the transaction of the sale is liable to STT.
Long Term Capital Gain = Sales Value – Cost of Acquisition (as per grandfathering rule) – Transfer Expenses

Tax Liability = 10% (LTCG – INR 1 lac)