I had received 500 shares of Sun Pharma as gift in 2008. Now I want to sell them. How will the cost of acquisition be calculated? How will the cost of acquisition be calculated if the stock was split or bonus shares were awarded? How long will the grandfathering benefit be effective? Will it be effective if I sell shares on November 1, 2018?
As you have received 500 shares of Sun Pharma as gift in the year 2008, your cost of acquisition will be the cost to the donor who had gifted the shares to you. This will be considered as the cost of acquisition at the first stage. If you sell the shares before March 31, 2018 on the floor of the stock exchange, then you will not be liable to pay any long-term capital gains tax. If you will sell the shares after April 1, 2018 then you will be liable to pay tax at 10% on the long term capital gains. The long term capital gains will be the difference between the sale price and determined cost of acquisition. In your case the determined cost of acquisition will have to be computed in the following manner:
a) First, the sale price and the price as on January 31, 2018, will have to be compared and the lower of the two will be the cost of acquisition at first stage.
b) The said cost of acquisition so computed in step (a) is to be compared with the actual cost of acquisition and whichever is higher is to be considered as the determined cost of acquisition. In your case the actual cost of acquisition will be the cost to the donor.
c) From the sale proceedings, the determined cost of acquisition will be reduced and the difference will be long-term capital gains on which you will liable to pay tax at 10%. In the case of bonus shares, the original cost of acquisition will be treated as zero, and when such shares are sold, the long-term capital gains will be worked out as per the above formula. In case of split of the shares, the original actual cost of acquisition will be considered and based on the facts of the case, the said original actual cost will be apportioned over the split shares and the long-term capital gains will thereafter be worked out as per the above formula.
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