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Samraat Jadhav |2538 Answers |Ask -Follow

Stock Market Expert - Answered on May 07, 2025

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more

Question by B on May 06, 2025

SIR : This is regarding demerged company's equity shares. If purchased prior to31-01-2018 we have to use FMV and the acquisition price also changes. Kindly let me know how to obtain/calculate the new acquisition price and FMV. THANKS . B VENKATRAMANA ACHARYA

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

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Question by Vina - Sep 06, 2022Hindi

I have to sell some shares of a particular large company, originally purchased in 1970 and thereafter getting increased through Bonus Shares in different proportions till last in Aug 2016. Meanwhile the company has also changed its face value from Rs 10 to Rs 1 per share in 2003-2005 or so, and thus increasing the no. of shares. Now I only know about the total nos of shares I have presently. My query is: 1. How to calculate its purchase cost, capital gains and taxable income? 2. Is LTCG rule for Grandfathering applies in this case also by taking FMV on 31.1.2018 of this share? 3. If I want to sell partially does FIFO rule to be taken for calculating capital gains apply? 4. What will be the taxation process (better if it can be illustrated by example with dates as above for better understanding) and to be shown under which schedule & in which ITR form no. Please enlighten me about the same as utter confusion is there.

Ans: I understand that you have sold listed shares and all corporate actions took place before 31st January 2018, hence capital gain earned after such date will be taxable.

For example: Today you hold 100,000 shares of that company, FMV as on 31st January 2018 is Rs 200 and today if you transfer 10,000 shares through recognised stock exchange at shares Rs 300, Capital gain of Rs 10,00,000 will be taxable on FIFO basis.

You have to show such gain in 112A schedule (acquired before 31st January 2018) under the Schedule CG.

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