Your Taxes

As on May 25, 2011, I held 35 shares of L&T at the average rate of ₹1,820.

I got 17 bonus shares in the ratio of 1:2 on July 11, 2013 (total holding 52 shares). Again, I got 26 bonus shares on July 15, 2017 (total holding 78 shares).

I sold the entire holding of 78 shares on December 15, 2017, at ₹1,597 per share.

I have no salary/pension income (senior citizen). My net income is around ₹3 lakh after deducting ₹10,000 towards savings bank interest. Am I required to pay any capital gain tax on the sale of shares, and file income tax return?

PA Mani

The cost of acquisition for bonus shares shall be nil and the period of holding shall be considered from the date of allotment.

Accordingly, gains from the sale of the original 35 shares and the bonus 17 shares (allotted on July 11, 2013) shall be treated as long-term as these shares were held for more than 12 months.

As a result, long-term capital gains (LTCG) arising from sale of these shares on December 15, 2017, is exempt from tax, provided applicable Securities Transaction Tax was paid. Further, while filing the tax return for 2017-2018, the exempt LTCG should be disclosed in the ‘Exempt Income’ schedule.

Gains arising from the sale of the 26 bonus shares on December 15, 2017, shall be treated as short-term capital gains (STCG) as the shares were held for less than 12 months from the date of acquisition (July 15, 2017).

STCG would be ₹41,522 (26 x 1,597).

Assuming STT is paid on sale, gains will be taxable at a concessional rate of 15 per cent.

Relief can be claimed by resident senior citizens if the taxable income excluding STCG is less than the basic exemption limit of ₹3 lakh.

If your income is below ₹3 lakh (the basic exemption limit for resident senior citizens), the difference between ₹3 lakh and the income can be reduced from STCG, and tax can be paid on the remaining STCG at 15 per cent (plus, additional 3 per cent cess ).

Further, if your income before giving Chapter VI A deductions such as 80C, 80D, 80 TTA (savings bank interest) and 80G (donations) exceeds ₹3 lakh, you would be obliged to file tax return.

You have an option to file the return in paper form instead of electronic filing, if no refund is claimed in the tax return.

The writer is Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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