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Long term capital tax due to share split

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ram bablani

22 Points Posted on 24 July 2024

Hello ,

Good Day. I have a query . We had 400 shares of a company A which we had bought in year 1995 for which the FMV on 31st Jan , 18 is say Rs600. Now in year 2021 the company does a split and due to the split the total shares becomes 1000 (face value Rs 5 to Rs 2) , so increased to 2.5 times the original quantity

We have sold the shares in Dec 2023. Now while filing the tax return , do we split /divide the original value of Rs600/ 2.5 to calculate the New Fair value per shares on 31st Jan or would the original value of Rs 600 per share be used .

Thanks

Replies (2)

Quick Summary

This discussion clarifies how share splits affect capital gains tax calculations. It explains that a share split itself isn't a taxable event, and the original cost basis should be spread across the new number of shares. The holding period also remains from the original purchase date. Specific guidance is provided for shares bought before April 1, 2001, and how to adjust the 31 January 2018 Fair Market Value (FMV) for splits occurring after that date.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121546 Points Posted on 24 July 2024

Divide the original value of Rs600/ 2.5 to calculate the New Fair value per shares on 31st Jan

Aashok Kumar Sharma

Finance/Compliance Consultant

75877 Points Posted on 07 November 2026

Spread the cost over the post-split shares:

• A share split (e.g. Rs 10 face value to Rs 2, so 400 shares become 2,000) isn't a transfer. The total cost stays the same. Divide it over the new number of shares. The holding period runs from the original purchase (1995).

• For shares bought before 1 April 2001, cost = actual cost or FMV on 1 April 2001 (your choice). Then for listed shares, Sec 112A grandfathering: cost = higher of the actual or 2001-FMV cost and the lower of the 31 January 2018 FMV and the sale price.

• Adjust the 31 January 2018 FMV per share for the split ratio (if the split happened after 31 January 2018, divide the per-share FMV by the ratio).

• LTCG at 12.5% (for sales after 23 July 2024) above Rs 1.25 lakh.