I have inherited shares from my father, who bought them at various points over the years. I do not have the exact cost of purchase of these shares. How do I determine the cost of acquisition for paying IT

Ans: In the absence of documents related to property, you can check bank statements for payment details and take the valuation certificate from approved valuer, to support cost of acquisition which is paid by your father. Alternatively, you can try to approach registrar/buyer to get copy of deed

Ans: You can deduct the purchase cost of shares which your father had paid

Ans: As per Indian Income Tax laws, when you inherit shares from your father, the cost of acquisition of such shares will be deemed to be the cost at which your father had acquired these shares. This cost is commonly known as the 'cost of acquisition' or 'purchase price'.

So, to answer your first question, you can use the price at which your father had purchased the shares as your purchase price.

Regarding your second question, the period of holding of the shares will be counted from the date of acquisition by your father. Hence, if the shares were purchased by your father 15-20 years back, and you sell them after holding them for more than 1 year from the date of inheritance, you would be eligible for long-term capital gains tax benefits.

Regarding your third question, if the purchase value of shares is not known, then the cost of acquisition for the purpose of computing capital gains will be the fair market value (FMV) of the shares as on 31st January 2018, which was the date of introduction of the tax on long-term capital gains on equity shares. This FMV will be considered as the cost of acquisition for the purpose of calculating capital gains.

It is important to note that if you sell shares within one year of acquisition, you would be liable to pay short-term capital gains tax on the profits made, whereas if you sell shares after one year of acquisition, you would be liable to pay long-term capital gains tax on the profits made. The tax rate for long-term capital gains tax on equity shares is currently 10% (if the gains exceed Rs. 1 lakh in a financial year) without indexation benefit or 20% with indexation benefit.

Ans: To calculate the new acquisition price and Fair Market Value (FMV) of equity shares in a demerged company, follow these steps:
1. Determining FMV (for shares purchased before 31-01-2018)
- FMV is typically based on the highest price quoted on a recognized stock exchange on January 31, 2018.
- If the shares were not listed on that date, FMV is determined by a merchant banker or registered valuer.
2. Calculating the New Acquisition Price
The cost of acquisition of shares in the resulting company (post-demerger) is calculated using Section 49(2C) and 49(2D) of the Income Tax Act:
- Formula:
[ \text{Cost of acquisition of new shares} = \text{Cost of original shares} \times \left(\frac{\text{Net book value of assets transferred}}{\text{Net worth of demerged company before demerger}}\right) ]
- The remaining cost is adjusted for the original shares.
For example:
- If you held 100 shares of a company at ?50 each (total ?5,000) before demerger.
- The company states that 7.29% of the cost applies to the new entity.
- Then, the cost of acquisition for the new shares = ?5,000 × 7.29% = ?364.50.
- The revised cost of the original shares = ?5,000 - ?364.50 = ?4,635.50.

hope this helps