Daughter will probably be liable to pay LTCG tax if gifted shares are bought after a yr

It is never a good idea to borrow money to save taxes

My father and mom purchased shares of blue-chip corporations earlier than 1994, a few of them in collectively and others individually. My father died in 1994. Shares held by my father and people collectively held had been transferred to my mom by 2002. The remainder, together with bonus shares, had been transferred by 2019. These shares had been gifted to my daughter, through a supply instruction slip in June 2019, who in flip bought them in December 2020. The right way to calculate capital positive aspects tax? Will grandfathering clause (of 31 January 2018) be relevant?

— Satya Nand

It’s assumed that your daughter is a significant within the fiscal yr the shares are bought. Because the shares had been held by your daughter and your dad or mum(s) cumulatively, for greater than 12 months, the asset shall be thought-about as long-term capital asset and the positive aspects arising out of the sale could be taxable as long-term capital positive aspects (LTCG) in your daughter’s fingers.

LTCG from sale of listed shares is calculated because the distinction between internet sale consideration (precise sale consideration much less brokerage and incidental bills) and the prescribed value of acquisition. Because the shares had been transferred to your daughter through reward/inheritance, the precise value of acquisition on your daughter would be the value to the unique proprietor. Because the shares had been acquired previous to 1 April 2001, the price of these shares could be substituted with the truthful market worth (FMV) as on 1 April 2001, on the possibility of the assessee. Additional, the price for the aim of computation of LTCG from sale of listed shares shall be the best listed value as on 31 January 2018 (instead of the price referred to above), supplied the listed value as on such date, is lesser than the sale worth. Nonetheless, the place the sale worth is lower than the listed value, the price for the aim of computation of LTCG, shall be sale worth or value referred to above, whichever is increased.

The resultant LTCG to the extent it exceeds the general restrict of 100,000 each year is taxable in your daughter’s fingers at 10% plus relevant surcharge and cess. Your daughter can search a roll over exemption in opposition to this LTCG underneath Part 54F of the Act by buying or establishing a residential home property in India, topic to the prescribed situations and timelines.

Parizad Sirwalla is companion and head, international mobility companies, tax, KPMG in India. Queries and views at mintmoney@livemint.com

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