Fair Market value on 1feb 2018 in case of bonus split

Others 369 views 3 replies

Rocks Parss

256 Points Joined June 2019

In case of sale of old shares the cost of holding can be taken as Grandfathered value as on 31st Jan 2018

In the event that the said Company has issued bonus shares after 1feb 2018 then in case of sale of original shares should the fair market value be prorated or should it be kept the same without pro-rata adjustment for bonus shares?

Further in the event a Company under scheme of arrangement issues shares of a demerged division after 1 Feb 2018 then in the event of sale of the original company shares post demerger should the fair market value be pro-rated or kept as original and in the event of sale of the demerged Company shares (which was not existing as on 1feb18) should the cost of acquisition of demerged Company be taken as pro-rata of fair market value of the original company (in the ratio as per valuation report) or fair market value is to be ignored and cost of acqusition be taken as pro-rata of actual cost of original Company shares as per valuation report percentage

Hope the query as posted is understandable and if not kindly revert for clarification of query

Replies (3)

sabyasachi mukherjee

27876 Points Joined May 2017

Fair market value hascto be ascertained

Kaushik Gandhi

2 Points Joined March 2025

not clear about the FMV(on 31st Jan 2018). FMV of my shares is 500 on 31st Jan 2018. However the company split the shares in 2020 in ratio 1:10. existing price of this split share is 250.

will the FMV(on 31st Jan 2018) be reduced to 500/10=50?

can i book loss of (500-250)x10=2500 on selling of this 10 shares?

or can i book loss of (500-250)x1 =250 on selling of 1 share?

Rocks Parss

256 Points Joined June 2019

Thanks for your views Jessica Stanley - Request and would appreciate views from other members especailly relating to bonus shares issued after 1 Feb 2018 as many practicitoners & advisors have asked to pro-rate the cost based on bonus ratio for the original shares. But then they all opine that cost of bonus shares is zero - why then should the cost of original pre feb18 shares be pro-rated? With the increase in capital gains tax rates it would help tax harvesting for long term investors as they could sell old original shares purchased before feb18 taking cost as that of original shares if subsequent bonus shares have been issued so there could be a loss which can be offset against even debt mutual funds which have been unfairly subjected to capital gains tax in an amendment which I term as retro as one had purchased debt mutual funds based on the prevailing tax laws and the said amendment should have applied to purchases after the date & not earlier purchased (like done in case of ULIPs). However for split of face value it may be difficult to hold the same view as Department may also not accept it. Looking forward and would apprecaite more clarifty & experience of others on this issue. Thanks