| Originally posted by :Ranjith Warrier |
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If a person has got some listed shares as Gift from his mother. and he sells the shares within say 5 months of recieving the gift.
1. Does the current holder (Son) get long term capital gain benefit if his mother had held the shares for more than 1 year?
2. Does the current owner get the long term capital gain benefit if he and hos mother jointly held the shares for more than 1 year (say 9 months by mother and the next 5 months by son)?
3. Does the Current owner get long term capital gain benefit at all?
4. is there any tax plan available under sec 54 if the holder want to purcahse a residential house or agriculatural land out of the consideration he got from the sale of shares?
Thank you in advance for the piece of your time and knwoledge you spent for me |
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1. No. Gifting is itself a transfer within the meaning of section 45. The mother having held the share for more than one year would have long term capital gain or loss. Since gifting is an off market transaction, it is not covered by section 10(38). Hence it is not exempt long term capital gain. However, the mother may choose at her option whether (A) to take indexed cost of acquisition and pay LTCG at 20% or (B) to avoid indexing the cost and pay LTCG at 10% on the resulting capital gain.
But if he had inherited the shares on the death of his mother or received the same on partition of HUF, then we could have considered the period held by his parents as well.
2. No.
3. You will be able to treat shares as a long term capital asset if it has been held for more than one year. Otherwise not.
4. You may refer sections 54F for residential house. However only the proceeds of disposal of a long term asset qualifies for investment under this provision. 54B for agricultural land cannot be claimed by you.
In the light of the above, your client may have to pay STCG @ 15% or 10% depending on the AY to which the transaction relates.
AY 2009-10 onwards - 15%
AY 2008-09 and other preceding years - 10%
However, please see the provisions of section 111A for set off of capital gains against unexhausted basic exemption limit in case of resident assessees.
Please revert for further information
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