I am a senior citizen. I had purchased 2,000 shares of NMDC Ltd some time in 2010 at the rate of ₹216 each. In lieu of this, I received 2,000 shares of NMDC Steel Ltd some time in December ‘22 and the same were sold — 2,000 shares of NMDC Steel Ltd — at the rate of ₹45 each in March ‘23 (within three months of receipt). What will be the tax liabilities on the share sale? Please provide guidance.

Sunil Kumar Shah

NMDC Steel Ltd was formed upon demerger of NMDC Ltd. All shareholders were issued one share in NMDC Steel for every one share they held in NMDC Ltd.

•           Issue of shares of NMDC Steel in December 2022 in lieu of shares of NMDC Ltd does not lead to taxable transaction.

•           Sale of shares of NMDC Steel in March 2023 is a taxable transaction; capital gain/loss needs to be determined, considering period of holding (long-term capital gain/loss if held for 12 months or more as this is a listed share) and cost of acquisition.

•           As per Section 49(2D) of the Income Tax Act, 1961, the price at which NMDC Ltd shares (after considering adjustments) were purchased in 2010 would be the cost of acquisition for determination of capital gain/loss. Based on the official communication shared by NMDC Ltd, the cost of a share in NMDC Steel shall be 57.29 per cent of NMDC Ltd share; which is ₹123.75 per share in your case.

•           Holding period would be determined considering the date of acquisition of shares in NMDC Steel, which is 2010.

Given that the sale price is lower than the cost of acquisition, the resulting long term capital loss can be adjusted against any long term capital gain that you might have for FY 2022-23. Otherwise, such loss can be carried forward up to eight years for adjustment against long term capital gains.

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