Long term Capitalgain

que.1,2,&3 ans. is it's canseder as long turm c.g

and 4.  exmption u/s 54ED

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

gopalakrishnan is right

ok, but then, what would be the tax on mother, as even though there is a cost of acquisition(whether indexed orotherwise0,but there is no income from transfer, as its a gift and there is no monetory return for the mother.

A-1

The transfer by the mother to his son of shares as gift is not transfer by virtue of Sec.47(iii). Hence no scope of taxing the mother for the gain as it is not transfer.....Explanation to Sec.2(42A) says in case of transfer as referred to SEc.49 [This case covered in Sec.49(1)(ii)], the period of holdig of the previous owner (mother) shall be taken for regarding any cap asset as long/short term....Hence it is long term asset if the mother held it for more than 1 yrs......

A-2

In this case, mother held shares for 9 months and son for 5 months which exceeds in totality from 1 yrs. hence by virtue of Exp. to sEc.2(42A), it si long term asset in the hadns of son.......

A-3

The current owner very well with every right has the option to regard is long term gain........

A-4

As for this answer, the replies of above friends will suffice............

And as for all the cases above, the cost of acquisition in the hands of the son shall be cost to the previous owner that is mother as indexed....(in this regard, benifit of proviso to Sec.112(1) is also available....

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Dear friend,

Exemption u/s 54 F can be claimed and not under 54ED