How is an individual taxed on beneficial properties constructed from inherited shares ?
I inherited shares of an unlisted firm in September 2021 and bought them in November 2021. What might be the price of acquisition of those shares?
—Name withheld on request
We perceive that you’ve got inherited sure unlisted shares in the course of the FY 2021-22.
Any revenue or beneficial properties arising from the sale of those unlisted shares shall be chargeable to tax beneath the top “Capital Gains”. Since the unlisted shares had been obtained as an inheritance, the price of acquisition for such unlisted shares shall be deemed to be the associated fee for which the earlier proprietor acquired it. Thus, within the on the spot case the price of acquisition of the unlisted shares would be the value at which the earlier proprietor (i.e. the particular person from whom you inherited such shares) acquired it.
Further, as per the supply of part 2(42A), unlisted shares that are held for a interval no more than 24 months earlier than sale, then the identical shall be thought of as short-term capital belongings and thus the revenue or achieve arising from the sale is handled as Short-term Capital Gain (STCG).
In case the identical is held for a interval greater than 24 months, the unlisted shares shall be thought of as Long-term Capital Assets and thus the revenue or achieve arising from the sale is handled as Long Term Capital Gain (LTCG).
It is to be famous that the interval for which the earlier proprietor held these shares, may even be thought of to calculate the interval of holding for you for the aim of dedication of short-term / long-term capital asset.
Additionally, as per provisions of part 50CA of the Act, it might even be famous that the place the consideration obtained on sale of unlisted shares is lower than the honest market worth (‘FMV’) decided as per the style prescribed [i.e. as per Rule 11UAA of the Income-tax Rules, 1962 (‘the Rules’)], then the FMV so decided shall be thought of as deemed consideration for the purposed of computing the capital achieve incomes.
Parizad Sirwalla is accomplice and head, international mobility providers, tax, KPMG in India
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