Hello sir, Good evening. kindly advise me on the following. 1,.I am having two dmat account with different brokers under the same PAN. now i need to consolidate the one demat account by transferring the shares of A demat account to B dmat account off market. now the question is 1. This off market transfer will attract the long term capital gain or not ? all shares in both dmat account are for more than one year. Only transfer from one broker to another broker with Sam PAN for consolidation and monitoring purpose. 2. For this off market transfer without payment of STT, In future if I sell these transferred shares what would be capital gain effect. All share are heldfor more than one year. However original purchase is STT paid. pl guide . Vinod Gupta

Ans: The capital gain tax will be applicable on date of purchase and not on date of transfer. If your wife has made some contribution towards purchase of the shares, you can consider it as a gift to you.

In this case also, the date is not going to be impacted.

Ans: Firstly, I am sorry to hear about your father's passing. I appreciate you reaching out for help in understanding the capital gains on the shares you inherited.

Inherited Shares and Their Cost Basis

When you inherit shares, their cost basis for capital gains calculation is the market value of those shares on the date of your father's death.

Impact of Merger on Shares

Since Mindtree merged with LTI, the shares you inherited were converted to LTI Mindtree shares. For calculating capital gains, we consider the inherited cost basis and the conversion ratio provided during the merger.

Calculating Capital Gains

Let's break down the steps:

Determine the Inherited Cost Basis: Find out the market value of Mindtree shares on the date of your father's death. This is the cost basis for those shares.

Adjust for Merger: During the merger, Mindtree shares were converted to LTI Mindtree shares. The cost basis remains the same but is adjusted based on the conversion ratio.

Selling the Shares: When you sell the LTI Mindtree shares, the selling price is compared with the adjusted cost basis to calculate the capital gains.

Example for Better Understanding

Suppose your father had 100 shares of Mindtree.
The market value of these shares on the date of his death was Rs 1,000 per share. Therefore, the total inherited cost basis is Rs 1,00,000.
During the merger, Mindtree shares were converted to LTI Mindtree shares at a specific ratio (e.g., 1 Mindtree share to 1.2 LTI Mindtree shares). So, you now have 120 LTI Mindtree shares.
Suppose you sell the LTI Mindtree shares at Rs 1,500 per share. The total selling price is Rs 1,80,000.
The capital gain is the difference between the selling price and the inherited cost basis: Rs 1,80,000 - Rs 1,00,000 = Rs 80,000.
Important Considerations

Long-Term vs. Short-Term Capital Gains: Since these shares were inherited, they are considered long-term capital assets if your father held them for more than one year before passing away. Long-term capital gains tax rates apply.


Steps to Ensure Accuracy

Verify Dates and Values: Ensure you have accurate records of the date of inheritance, market value on that date, and the merger details.
Consult with a Tax Professional: Given the complexity of tax laws, consulting with a certified tax professional is advisable. They can provide precise calculations and tax planning.
Final Insights

Inherited shares have a cost basis based on the market value at the time of inheritance. Merger adjustments must be considered for accurate capital gains calculation. Proper record-keeping and professional advice ensure accurate and tax-efficient handling of these transactions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You cannot use a capital loss from an off-market sale (without STT) to offset capital gains where STT was paid. Capital losses are only eligible for offset if they arise from transactions where STT was paid, as per tax laws.

To potentially utilize the capital loss, consider selling the shares on the stock exchange if they become listed again. If that's not possible, the loss might be treated as a long-term capital loss, but it can only offset similar capital gains, not those involving STT. Consulting with a Certified Financial Planner or tax expert may help explore other options.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in