For inherited assets, period of holding is from the date of purchase by the owner
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I own few equity shares, which I received from my father. He purchased a few of these (physical shares) between 1990 and 1995 . Some were purchased during the 2005-08 period, demat form. My father passed away in 2008. I got those shares converted to my name. Now I want to sell those shares. As I have held them for more than 7 years, I believe I need not pay capital gains tax. All my shares are listed on the National Stock Exchange (NSE) and the BSE. Can you please tell, if I sell my shares now, whether the total amount that I get will be completely tax free?
—Ravi Chandra Rachakonda
The shares you have inherited are listed on recognised Indian stock exchanges (NSE and BSE).
Further, as you would also sell these shares through a recognised stock exchange, you would be liable to the Securities Transaction Tax (STT) at the time of sale.
In case of inherited assets, which include shares, the period of holding is reckoned from the date of purchase by the owner who has actually acquired the asset (other than by way of gift or inheritance).
As your father had originally acquired the shares, the period of holding will be counted from the date your father had bought the shares.
As you would sell the shares after holding them for more than 12 months from the acquisition date, and the same would be subject to STT, the resulting long-term capital gains (LTCG), if any, shall be exempt from tax (section 10(38) of the Income-tax Act, 1961).
But you should report the LTCG in your personal tax return to be compliant from reporting perspective.
Further, as per the recent amendment applicable from the financial year (FY) 2016-17 onwards, tax return filing has been made mandatory in respect of taxpayers with exempt LTCG arising from equity shares or equity-oriented mutual funds (where such exempt income and other income exceeds applicable income slab threshold).
I am a senior citizen and have investments of Rs 8 lakh in Senior Citizen Savings Scheme (SCSS) for the past 7 years. I want to withdraw money from it and use it settle my health bills, as I am about to undergo a valve transplant. How will this entire transaction be taxed? Will I get any exemption?
We have assumed that you will be able to withdraw the amount prior to maturity as per the provisions of the SCSS.
The interest portion earned on SCSS will be entirely taxable. Further, tax would be deducted at source on interest if the same exceeds Rs10,000 per annum.
But if your total income during the FY does not exceed the basic threshold limit, you may submit Form 15H, giving a declaration stating that the tax on your estimated total income of FY would be ‘nil’ or the income is below the amount not chargeable to tax. In such a case, no tax would be deducted at source. You will not be eligible for any specific tax benefit at the time of withdrawal from the SCSS.
Parizad Sirwalla is partner (tax) KPMG.
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