Will Shares Sold in April 2024 Be Taxed at 12.5%?

Ans: Hello Devendran,

Firstly, let's discuss your tax implications for selling the Pre-IPO shares after holding them for two years. In India, shares that you've held for more than one year are considered long-term capital assets. The gains from selling such assets are called long-term capital gains (LTCG). The tax on LTCG from equity shares is 10% if the gains exceed ₹1 lakh in a financial year.

However, there's an important catch here. The LTCG tax of 10% applies only if the Securities Transaction Tax (STT) was paid both at the time of purchase and sale of these shares. Since you bought Pre-IPO shares, it's likely that STT was not paid at the time of purchase as STT is typically only applicable for transactions occurring on a recognized stock exchange. In such cases, your gains may be taxed at 20% with indexation benefits (if applicable).

Moving on to the second part of your question about gifting shares to your son. Under current Indian tax laws, any gift received from a relative, including a parent, is not taxed in the hands of the recipient. So, if you gift these shares to your son, he won't have to pay any tax at the time of receiving the gift.

However, when your son eventually sells these shares, he'll have to pay tax on the capital gains. The cost of the shares for the purpose of calculating capital gains will be the cost at which you originally purchased them.

Please do consult with a chartered accountant or a tax consultant to understand all the details specific to your situation.

Hope this helps!

Ans: Capital gains is only applicable once you sell those shares. Further, you will also get the benefit of indexation on the cost and your 10 lakhs will be adjusted and become approx. 17 lakhs. The difference of 13 lakhs will be subjected to capital gains tax @ 10%. However, you can either invest in bonds / immovable property (assuming you own only one property) and save this tax.

Ans: 01. LTCG on Sale of securities shall be taxable @ 12.50%, if the sale is effected after July-2024. However, you would be entitled to a basic exemption of Rs.1.25 lakhs, from LTCG.
02. LTCG on Sale of securities, shall not be exempted, if you buy shares of Private limited company, with the same amount of capital gain.
Most welcome for any further clarifications. Thanks.

Ans: 01. Considering your Income of Rs.9.00 lakhs as business income & Rs.1.00 lakh as STCG on securities, without any tax savings, your tax liability would be around Rs.62,400.00 in New tax regime. If we opt for the old tax regime, your tax liability would be much more than this.
Most welcome for any further clarifications. Thanks.