My brother had purchased Shares of Rs. 1 Lacs in June 2016, Sold them in May 2018 for Rs. 4 Lacs. But Fair Market Value (FMV) on 31-Jan-18 of these shares was 5 Lacs. So his Actual Long Term Capital Gain (LTCG) is Rs 4L - 1L = 3L.
However if we go by FMV, he incurred loss of Rs. 1L (Sell value 4L - FMV 5L = -1L)
As per guidelines for calculating tax on LTCG, we need to take LOWER value of actual Sell value (4L in this case) and FMV (i.e. 5L) and take HIGHER of this (i.e. 4L) and actual Purchase Value (1L) to arrive at Cost of Acquisition (CoA) = 4L. Thereby his LTCG is 0 (i.e. 4L actual Sell Value - 4L arrived CoA = 0).
Even the IT Dept Excel/Java utility shows Capital Gain = 0 (neither Gain nor Loss). Is this right? or we are doing something incorrect?
(Note that I have rounded the numbers to Lacs for easy understanding)
1 Answers
Hi,
Yes, your understanding and calculation looks fine to me.
The cost of acquisitions in respect of the long term capital asset acquired by the assessee before the 1st day of February,
2018 , shall be deemed to be the higher of ;
a) the actual cost of acquisition of such asset (and)
b) the lower of – (I) the fair market value of such asset as on 31-01-2018 and
(II) the full value of consideration received or accruing as a result of the transfer of the capital asset. Related articles :
2018 , shall be deemed to be the higher of ;
a) the actual cost of acquisition of such asset (and)
b) the lower of – (I) the fair market value of such asset as on 31-01-2018 and
(II) the full value of consideration received or accruing as a result of the transfer of the capital asset. Related articles :
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