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SREI Resolution for NCD: How to Calculate Long Term Capital Loss?

Ramalingam Kalirajan |8325 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Question by Chandra on Jul 24, 2024Hindi

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in SREI resolution for one NCD purchased at 200,000.00 with consideration admitted value 230533, i got cash receipt of 21630 and future SR of 13000 and OCD of 68000 which not sure when it will redeem in next 8 yrs. For this year taxation purpose ,Long term capital losses what value should i use for cost of acquisition ,transfer expense and sale price, can you please help to answer this query ?

Ans: Assessing Your Non-Convertible Debenture (NCD) Taxation
Let's break down your query regarding the NCD taxation for this year. We'll focus on the values for cost of acquisition, transfer expenses, and sale price.

Understanding Your NCD Transaction
Purchased NCD: Rs 2,00,000
Admitted Value: Rs 2,30,533
Cash Receipt: Rs 21,630
Future SR: Rs 13,000
OCD: Rs 68,000 (redemption uncertain over 8 years)
Cost of Acquisition
The cost of acquisition is the original purchase price of the NCD. For your case, it's Rs 2,00,000.

Transfer Expenses
Typically, transfer expenses include brokerage, commissions, and other related costs incurred during the purchase and sale of the NCD. You haven't mentioned any specific transfer expenses, so we'll assume there are none. If there are any, you should include them here.

Sale Price
The sale price for the purpose of calculating the capital gains or losses includes the cash received, and the future SR received, but excludes the OCD, as its redemption is uncertain and spread over several years.

Cash Receipt: Rs 21,630
Future SR: Rs 13,000
Calculating Long-Term Capital Loss
Cost of Acquisition: Rs 2,00,000

Transfer Expenses: Rs 0 (assumed)

Sale Price: Rs 21,630 (cash received) + Rs 13,000 (future SR) = Rs 34,630

Steps to Calculate
Cost of Acquisition: Rs 2,00,000
Transfer Expenses: Rs 0
Sale Price: Rs 34,630
Long-Term Capital Loss Calculation
Long-Term Capital Loss = Cost of Acquisition - Sale Price - Transfer Expenses

Long-Term Capital Loss = Rs 2,00,000 - Rs 34,630 - Rs 0

Long-Term Capital Loss = Rs 1,65,370

Taxation Insight
Cost of Acquisition: Rs 2,00,000
Transfer Expenses: Rs 0
Sale Price: Rs 34,630
Long-Term Capital Loss: Rs 1,65,370
This loss can be set off against long-term capital gains in the same financial year. If not fully utilized, it can be carried forward for up to eight assessment years to set off against future long-term capital gains.

Final Insights
You should use Rs 2,00,000 as the cost of acquisition. Transfer expenses are zero if there are none. The sale price for this year's tax purposes is Rs 34,630. Thus, your long-term capital loss amounts to Rs 1,65,370.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

Asked on - Jul 30, 2024 | Answered on Jul 30, 2024

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Thanks for your support and your explanation to help me on this issue..

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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