The full value of the proceeds from the sale of the inherited shares will not be taxed as a capital gain


Question: I inherited some shares five years ago, which are in my demat account. I plan to sell these stocks now. Since I did not incur any costs, will the full amount realized on the sale of these shares be taxed as my capital gains?

To respond: No, the full value of the sale proceeds will not be taxed, as your capital gains are in your hands. Even if your acquisition cost for the inherited shares is nil, you will still get a deduction for your deemed acquisition cost. For the calculation of capital gains, the deemed acquisition cost for the seller in the case of property received as a gift or inheritance is the cost of the previous owner, who had actually paid for it. I assume that the stocks in your demat account are publicly traded stocks. Since your total holding period and that of the previous owner who paid for it is over a year, the profits from the sale of these shares would be considered long-term capital gains. If you sell the shares through a broker on the platform of an Indian stock exchange where Securities Transaction Tax (STT) is paid, the profits will be taxed at a flat rate of 10% without indexation after the first Rs 1 lakh of long-term capital gains on which no tax is due. The Rs 1 lakh limit is to be calculated for long-term capital gains on the sale of all listed shares and equity-based schemes taken together.
For assets acquired before April 1, 2001, the fair market value as of April 1, 2001 may be considered the acquisition cost for purposes of calculating long-term capital gains. In the case of listed shares acquired before January 31, 2018 and on which the STT has been paid, you benefit from a vested right, under which the market price of the shares on January 31, 2018 is to be taken as the cost of acquisition if it is higher than your assumed acquisition cost.

Question: Up to what amount can parents give gifts to their children, and up to how many times a year?

To respond: Parents can donate any amount to their children without any limit. Likewise, you can make as many donations as you want in a year. Please note that although there is no upper monetary limit up to which parents can give gifts to their children, one cannot give a single gift of more than Rs 2 lakh at a time in cash. If the gift is to a minor and your objective is to reduce your tax liability, this will not serve your objective because a minor’s income from all passive sources must be matched with the income of the parent with the highest income. higher. .

Balwant Jain is a tax and investment expert.

(Disclaimer: The views expressed are those of the author and Outlook Money does not necessarily endorse them. Outlook Money will not be liable for any damages caused to any person/organization directly or indirectly.)


Comments are closed.