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Anil Rego  |340 Answers  |Ask -

Financial Planner - Answered on Jun 14, 2022

Anil Rego is the founder of Right Horizons, a financial and wealth management firm. He has 20 years of experience in the field of personal finance.
He’s an expert in income tax and wealth management.
He has completed his CFA/MBA from the ICFAI Business School.... more
Ganesh Question by Ganesh on Jun 14, 2022Hindi
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I have following queries:

1) I want to sell Bonus Shares received prior to January 31, 2018. What will be their acquisition cost? Will grandfathering provisions be available?

Ans: LTCG of these Bonus shares shall be calculated by considering FMV (Fair Market Value) on 31/01/2018. Grandfathering provision is available here.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Asked by Anonymous - Mar 19, 2023Hindi
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I have inherited shares from my father after his death. Many of these shares had been purchased by him some 15-20 years back and the purchase price is not known to me. I have following queries when I sell these shares : 1) Will my purchase cost be taken as NIL or can I use the price which my father paid as my purchase price 2) If yes then do I have to retain them for 1 year for claiming Long Term Gain/Loss 3) For shares whose purchase value is not known can I ONLY use FMV as on 30/1/2018 for calculating the gain or loss
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.
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hi sir : my son doing job since two year monthly earning is 60 K. but his saving is nil. pl. advice where to invest
Ans: It's great that your son has started earning, and it's essential to guide him on saving and investing for the future. Here's a step-by-step investment plan tailored for him:

Emergency Fund: Start by building an emergency fund equivalent to 3-6 months of expenses. This fund should be easily accessible, like a savings account or a liquid fund.
Debt Repayment: If he has any high-interest debts like credit card bills or personal loans, it's wise to clear those first to avoid paying hefty interest.
Investment Options:
Equity Mutual Funds: For long-term wealth creation, he can start SIPs in diversified equity funds. A mix of large-cap, mid-cap, and multi-cap funds can provide growth.
PPF (Public Provident Fund): A tax-efficient and safe option for long-term savings with a lock-in period of 15 years.
NPS (National Pension System): A retirement-focused investment with tax benefits, offering a mix of equity, corporate bonds, and government securities.
Term Insurance: Since he's working, consider getting a term insurance plan to ensure financial security for his dependents.
Health Insurance: A comprehensive health insurance plan to cover medical emergencies can provide financial security and tax benefits.
Budgeting and Savings: Encourage him to create a monthly budget to track expenses and identify areas to save. Automating investments through SIPs can also help in disciplined saving.
Financial Education: Educate him about the importance of financial planning, saving, and investing. Encourage him to read books or attend workshops on personal finance.
Starting early with disciplined saving and investing can help him build a substantial corpus over time. Encourage him to consult a financial advisor for personalized guidance tailored to his financial goals and risk tolerance.
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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