Hello Sir, How to show the merger of shares in ITR, like I had shares of Midtree which was later merged with LTI and formed a new merged company named LTI Mindtree. Kindly help in this case, how to show in ITR. Rgds Rakesh

Ans: In case of fractional quantities, you can round off the quantities and adjust Sale consideration/Cost to the extent capital gain amount remain the same.

Further, tax on LTCG was introduced from 1.02.2018. Thus, Fair Market Value as of 31st Jan 2018 is considered as cost of acquisition calculation (provided sell value is higher and actual cost is lower).

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: 01. I feel Form ITR-02 would be applicable in your case.
02. You need to declare the Sale & Cost of shares you have sold to work out LTCG/STCG.
03. If shares sold are of Listed company, it shall be covered under LTCG.
Most welcome for any further clarifications. Thanks.