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: 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: Transfer of listed shares through stock exchange is taxable from FY 2018-19 and for shares acquired before 1.02.2018 will not be taxed for gain earned till 31.01.2018. Thus, you need to check sale value with FMV as on 31.01.2018. Lower of both will be compared with cost of acquisition. Higher of both will be considered as cost of acquisition and difference amount will be charged under the head income from capital gain for investor.

Thus, there is no limit on years like 10-15-20 years.

Ans: Option a. As mentioned in your question is the way how it would be looked at, from capital gain tax perspective (100 shares at original price & date of purchase & 300 shares at zero price with date of allotment as reference for determining LT or STCG)