Money earned by selling rights issue

Tax queries 227 views 2 replies

Ram K

216 Points Posted on 29 August 2020

Dear All,

In may 2020 when reliance industries brought rights issue, they offered me some rights in my demat account. I was not in a position to buy the additional shares, so I simply sold those rights in the stipulated time in share market.

They were not shares but just rights that I sold for some 180 Rs/right and I got some money say 50K INR after selling them.

Now there is no cost of acquisition as they were just given to me either to buy as full shares at their stated value (some Rs 1200 / share) or sell at rights price (somewhere 180 to 190 / right) or just let go.

This 50K that I received, is it taxable? and if so under what category, LTCG, STCG or is full 50K taxable as simply other income?

Your inputs would be great. Thanks a lot in advance.

Replies (2)

Roshni

Studwnt

1141 Points Posted on 29 August 2020

Cost of acquisition would be nil...period of holding will be from the date of original shares(to determine long term or short term). it comes in capital gain head only.

Ram K

216 Points Posted on 05 September 2020

Thanks. In case of period of holding, the rights are credited to Demat account and there's a very narrow window given by the company to trade them in share market if you wish so. Generally if rights are credited on say 1-May then you can trade say between 10-May thru 20-May as an example i.e. all process happens within a few weeks. So I believe this is essentially a short term gain.