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In 1983, I was allotted 10 shares of face value (FV) ₹100 of Hindustan Ciba-Geigy (HCB) for ₹1,400, and further two shares for ₹350 in 1985. In 1991, I received six bonus shares. The company changed name in 1996 and split into Novartis India, Syngenta India and BASF. In lieu of the 18 shares of ₹100 of HCB, I received 180 shares of FV ₹5 of Novartis India, 180 shares of FV ₹5 of Syngenta India, and 81 shares of FV ₹10 of BASF. Syngenta India was delisted in 2007. I sold the Syngenta shares in July 2018 @ ₹1,900 each to an individual party. Kindly advise my income tax liability. I now learn that Syngenta India vide its EGM notice dated December, 8, 2017, had proposed to reduce public holding by paying ₹2,445 per share after consideration by NCLT, the next date of hearing of which was to be on January 17, 2019.
A Kapur
As per Section 49(2C) of the Income Tax Act, the cost of acquisition of shares in the resulting company (Syngenta India Ltd (SIL)) will be calculated as :
(The net book value of the assets transferred in the demerger to the resulting company / The net worth of the demerged company immediately before the demerger) x The cost of acquisition of the shares in the demerged company
The original cost of ₹1,750 has to be apportioned as above. For the purposes of indexation, the cost of acquisition shall be the cost determined as above or the fair market value (FMV) of the shares as of April 1. 2001.
Since the shares of Syngenta India were held for more than 24 months, any loss or gain arising from the sale of the shares will be regarded as long-term capital loss/gain (LTCL/LTCG). LTCG shall be taxed at the rate of 20 per cent (exclusive of applicable surcharge and cess) as per Section 112 of the I-T Act.
As the sale happened in July 2018, the proposed buy-back in 2019 will not have an impact. Further, as the shares of Syngenta India are delisted, if the actual sale consideration is less than the FMV of the shares, the FMV will be deemed as the sale consideration.
To enjoy the tax-free dividends , what is the minimum period of holding before or after the dividend payment record date?
Prem Nath Beri
Dividends of up to ₹10 lakh is tax-free; the period of holding before or after the record date is not relevant. Dividend earned from domestic companies in aggregate exceeding ₹10 lakh during a tax year shall be chargeable to tax at the rate of 10 per cent (exclusive of surcharge and cess) as per Section 115BBDA.
I will hopefully receive my bonus for FY2018-19 from my company in May. Will this be taxable in FY2018-19 or FY2019-20?
Chintamani Ananth
Salary is taxable on a ‘due’ or a ‘receipt’ basis, whichever is earlier, as per Section 15. The bonus can be regarded as ‘due’ to you at the time of declaration, i.e., in May 2019. Hence, the bonus is taxable in FY2019-20.
The writer is Partner, Deloitte India. Send you queries to taxtalk@thehindu.co.in
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