Tax implications for unlisted & inherited shares

Querist : Anonymous (Querist) 20 July 2010 This query is : Resolved
Our father died intestate and I got unlisted shares of a co. as my share in December 2009. My cost of aquisition in this case is nil. What will be tax implication if I sell these shares now or after holding them till Jan. 2011.

Pl. advice suitably.

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soumitra basu (Expert) 22 July 2010
Your cost of acquisition shall be the cost of acquisition of your father.
You shall be entitled to indexation from the date of purchase of your father.
You can avail exemption on long term capital gain either by investing the same in purchase of residential house or specified investment. The capital gain is 20% in case of long term. However, you shall be entitle to 10% tax if you do not avail the indexation.

Vineet (Expert) 22 July 2010
The cost of acquisition and date of acquisition in your hand is deemed to be the same as in the hands of your father. Hence the asset has already taken colour of Long Term Capital Asset.

If you sell these shares before 31-3-2011, you will be liable to pay Long Term Capital Gains Tax @20.60% on difference of sale price and indexed cost of acquisition. This tax can be saved by investment in specified bonds u/s 54EC or new residential house u/s 54F subject to fulfilment of conditions therein.

After 31-3-2011, new Direct Tax Code in most likelyhood will come into effect and then taxation of capital gains will change. For LT Capital Asset there will be some relief which is yet to be finalised but certainly there will be no exemption from such tax.

Mr Basu : The proviso to Section 112(1) is not applicable in the case of Unlisted Shares.

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