FMV of shares can be utilized to calculate LTCG in particular circumstances

I bought 2,300 shares of Allahabad Bank for a value of ₹195 every in 2013. Following the merger of this financial institution with Indian Bank, I used to be issued 115 shares of Indian Bank in April 2020. I offered these shares in March this yr for a value of ₹135 every. How do I compute capital positive aspects on this case? Can I take the price of acquisition of Allahabad Bank as the price of authentic shares? If sure, what’s my long-term capital positive aspects complete for the evaluation yr 2021-22? Alternatively, ought to I undertake the truthful market worth (FMV) on 31 January 2018, as grandfathered value, as value of acquisition?

—Viswanathan Ok.

As the fairness shares (listed on a acknowledged inventory change in India) had been held by you for greater than 12 months from date of allotment, the positive aspects arising out of the sale can be taxable as long-term capital positive aspects (LTCG) in your palms.

For the aim of computation of LTCG, the precise value might be changed by FMV of the shares as on 31 January 2018 (the place precise value of buy is decrease than such FMV), offered the FMV as on 31 January 2018 is lesser than the sale worth. However, there isn’t a particular clarification with respect to which FMV needs to be thought-about within the case of a share that was held by a taxpayer subsequent to a merger (i.e. FMV of the amalgamating firm i.e. Allahabad Bank, or of the amalgamated firm i.e. Indian Bank within the instantaneous case).

Based on a harmonious interpretation of the provisions and the intention of the legislation, one might think about adopting a view that the FMV of the shares within the amalgamating firm i.e. Allahabad Bank as on 31 January 2018 is to be thought-about for the aim of figuring out the price of acquisition.

However, within the absence of specific readability on the identical, the place isn’t free from doubt.

Parizad Sirwalla is associate and head, world mobility providers, tax, KPMG in India.

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