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TAXABILITY U/S 112A

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Chahat Bansal

128 Points Posted on 28 December 2020

In case cost of acquisition of Equity shares is not available then can we consider only FMV as on 31.1.2018 ?

From where we can get FMV as on 31.1.2018 ?

Kindly share any practical examples or case studies to calculate LTCG u/s 112 A
Thanks in advance 🙏

Replies (4)

Quick Summary

This discussion clarifies the taxability of equity shares under Section 112A, particularly when the cost of acquisition is unknown. It explains that the Fair Market Value (FMV) as of 31st January 2018 can be used as the cost of acquisition for calculating Long Term Capital Gains (LTCG). The FMV for listed shares is the highest quote on that date, while unlisted shares require indexed cost of acquisition. The applicability of Section 112A also depends on whether Securities Transaction Tax (STT) was paid, with specific rules for shares acquired before or after 1st April 2004.

CA Salman Ansari

Salman Ansari & Assoc.

120 Points Posted on 29 December 2020

I don't see a problem with considering FMV on 31/1/18 as Cost Of Acq (COA) , as you would be forgoing the benefit of considering a higher COA based on actual, thereby your gain could be higher. However, you cannot take FMV as COA if the Full Value of Consideration (FVOC) is higher than such FMV. In such a case, FVOC shall be the COA and no capital gain/loss incurred.

As for the second question, for listed share, FMV is the highest quote on 31/1/18 whereas for unlisted shares you need to take the indexed cost of acquisition.

Chahat Bansal

128 Points Posted on 29 December 2020

Thanks for valaable information @ Ansari Salman.

STT is not paid on such shares then whether 112A will be applicable on them ?

I ll be highly obliged if you provide me information that from where I can get highest quoted price of any share.

CA Salman Ansari

Salman Ansari & Assoc.

120 Points Posted on 29 December 2020

For STT, there are further two scenarios:

1) If the security was acquired before 1/4/2004, 112A will be applicable as STT was enacted afterwards.
2) If the security was acquired afterwards and STT is not paid because shares were not traded through Stock Exchange, then 112A will not be applicable.

For Highest quoted price, the quotations as on 31/1/2018 are attached herewith (downloaded from https://www.bseindia.com/markets/equity/EQReports/bhavcopy31012018.aspx). Find your share in column B and the corresponding High Quote (Column F) would be applicable for us.