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I bought 70 shares of IOC on February 2, 2018, at ₹408/share. IOC declared 1:1 bonus shares on March 15, 2018. Based on this, my shares increased to 140, and the corresponding rate was ₹209/share. Out of this, I sold 70 shares through a recent buy-back offer and got credit on February 13, 2019. Please advise the purchase rate to consider for cost computation. Is it ₹408 or ₹209?
SR Subramani
As per Section 45(2A) of the Income Tax Act, the FIFO (first in first out) method should be applied for the sale of securities held in the demat form. Thus, in your case, the lot of 70 shares purchased on February 2, 2018, should be considered as sold on February 13, 2019.
As the period of holding in this case is more than 12 months, the shares should be considered as a long-term capital asset and the gains/loss will be considered as long-term capital gains/loss (LTCG/LTCL). Accordingly, any such LTCG shall be taxable at 10 per cent without indexation for cost inflation (plus surcharge and education cess as applicable), if the overall LTCG exceeds ₹1 lakh. The cost of acquisition for this purpose should be the actual cost of acquisition — ₹408/share.
The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in
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