Personal Finance

Your Taxes

Sanjiv Chaudhary | Updated on September 15, 2019 Published on September 15, 2019

I am a super senior citizen and a Central government pensioner. During FY2018-19, I sold equity shares that were purchased 15-20 years ago. I do not know their purchase price. For the purpose of calculating the capital gains tax, can I adopt the highest market price as of January 31, 2018 as the purchase price? Kindly clarify.

NR Krishnaswami

As per the recent amendment made by the Finance Act 2018, Section 112A was introduced under the Income Tax Act. This section levies tax on long-term capital gains (LTCG) on sale of listed equity shares (in excess of ₹1 lakh) sold on or after April 1, 2019. The cost of acquisition for the purpose of calculating LTCG is calculated as per the provisions of Section 55 of the I-T Act, which provides for grandfathering of costs as of January 31, 2018. On this basis, the cost of acquisition is considered to be higher of the following two: original purchase price per unit, or the lower of the FMV (fair market value) (as defined) as of January 31, 2018, or the sale price per unit.

The original purchase price of shares is not known and it is being presumed that the purchase price of these shares 15-20 years ago must have been very low, considering the increase in prices over a period of time. You may consider the lower of the FMV as of January 31, 2018, or the sale price per unit as the cost of acquisition for the purpose of calculating LTCG. This shall also not result in any loss to the government exchequer.

The writer is a practising chartered accountant. Send your queries to [email protected]

Published on September 15, 2019
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