Tax implications on sale of shares depends on holding period from date of acquisition
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My mother holds 5,000 shares of an indian company. She wants to gift these chares to me these shares. Will i be taxed for this? Further, i want to sell these shares through a recognised stock exchange. what will the tax implications?
If an individual receives any property (other than immovable property), from any person during a financial year (FY) without consideration, the fair market value (FMV) of which exceeds Rs.50,000, the transaction will be taxable as ‘income from other sources’.
An exemption is available if it is received from a relative, which includes mother. Accordingly, the shares received by you from your mother, as gift, shall not be taxable in your hands. But capital gains, if any, from subsequent sale of shares shall be taxed in your hand.
We understand that the shares are listed on a recognised Indian stock exchange. Further, we understand that you would also sell the shares through a recognised stock exchange and hence, would be liable to securities transaction tax (STT).
The tax implications on sale of shares depends upon the period of holding from the date of acquisition. In case of gifted assets, which includes 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 mother had originally acquired the shares, the period of holding will be from the date your mother bought them.
Also, in case of gifts, the cost of acquisition shall be the cost to the previous owner, who actually acquired the asset (other than by way of gift or inheritance).
The cost at which your mother acquired the shares shall be considered the cost of acquisition while computing capital gains.
If you sell the shares after holding for more than 12 months from when your mother acquired them, the gains, if any, from the sale will be termed as long-term capital gains (LTCG).
The LTCG from sale of listed shares is liable to STT, and can be claimed as exempt from tax under section 10(38) of the Income-tax Act, 1961. Further, the amount of exemption should be disclosed in your personal tax return.
If you sell the shares before holding them for up to 12 months from when your mother acquired them, any gains from the sale will be termed as short-term capital gains (STCG). It should be computed as the difference between net sale proceeds (after deducting the incidental transfer charges) and cost of acquisition (as described above).
STCG from sale of listed shares, liable to STT, will be taxed at 15%. If the total taxable income, excluding STCG, is below the threshold taxable limit, then such a shortfall can be adjusted against the STCG and the balance STCG will be taxed at 15%. If total taxable income during the FY exceeds Rs.1 crore, surcharge should be levied at 15% on basic tax (as applicable). Further, education cess of 3% will have to be applied on basic tax as well as surcharge (if applicable).
I have earned interest of Rs.25,000 on my savings bank account. Is there any tax benefit?
The interest earned on a savings bank account maintained with a specified bank, cooperative society or post office is taxable in the hands of the individual as ‘income from other sources’.
One can claim tax deduction with respect to savings bank interest earned from total income, subject to maximum cap of Rs.10,000 per financial year under section 80TTA of the income tax Act.
Accordingly, you can avail deduction of up to Rs.10,000 for FY17. The balance interest of Rs.15,000 shall be taxable as per the applicable income tax slab rate for you.
If your total income exceeds Rs.1 crore during FY17, surcharge at 15% will be applied on the basic tax rate.
Also, education cess of 3% on basic tax as well as surcharge (if applicable) shall be levied.
Parizad Sirwalla is partner (tax), KPMG.
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