I’m a senior citizen and haven’t any insurance coverage—besides mediclaim—and reside off fairness dividends and FD curiosity. For medical wants, I promote shares—held over 10 years—and maintain earnings beneath ₹5 lakh. The drawback is many companies are bent on delisting, by which case I’ve to tender the whole thing. How do I handle if I promote shares and face delisting, as a result of then my earnings would shoot between ₹5 and 10 lakh?
— Name withheld on request
We have assumed that you’ve acquired the shares after 1 April 2001.
As the fairness shares are held by you for greater than 12 months (listed shares)/24 months (unlisted shares/ delisted shares), the asset shall be thought-about as long-term capital asset, and the positive factors from the sale could be taxable as long-term capital positive factors (LTCG) in your arms.
In case the listed shares are transferred, capital achieve is computed because the distinction between internet sale consideration (precise sale consideration much less brokerage and incidental bills) and the prescribed price of acquisition. The stated prescribed price for the aim of computation of LTCG from sale of listed shares shall be the best listed worth of the shares as on 31 January 2018, offered the listed worth as on such date is lesser than the sale worth. However, the place the sale worth is lower than the listed worth, the fee for the aim of computation of LTCG shall be sale worth or precise price, whichever is increased. The resultant LTCG to the extent it exceeds the general restrict of ₹100,000 each year, is taxable in your arms at 10% plus relevant surcharge and cess.
In case the unlisted (delisted) shares are transferred, capital achieve is computed because the distinction between internet sale consideration (precise sale consideration much less brokerage and incidental bills) and the listed price of acquisition.
The listed price of acquisition would then be calculated as price of acquisition /price inflation index (CII) of yr of buy * CII of yr of sale. (CII prescribed for FY 2020-21 is 301). Further, as per Section 50CA of the Act, if the precise sale consideration is decrease than the truthful market worth of the unquoted shares (as prescribed beneath Rule 11UAA of the Income-tax Rules, 1962) on the time of sale, the truthful market worth could be thought to be the deemed sale consideration for the aim of calculating such LTCG. The resultant LTCG is taxable in your arms at 20% plus relevant surcharge and cess.
There aren’t any provisions prescribed in instances the place the shares have undergone delisting.
Accordingly, a view could also be adopted that the capital positive factors computation depends on whether or not the fairness shares are listed or not as on the date of switch (i.e. sale).
Separately, a roll over exemption will be sought in opposition to this LTCG beneath Section 54F of the Act by buying or setting up a residential home property in India, topic to the prescribed situations and timelines.
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