Skip to content

NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Caselet: Anita bought 1,000 shares of a listed company on 1 March 2017 at Rs 300 per share. The 31 January 2018 closing price was Rs 500 and she sold all shares on 10 August 2024 at Rs 450 per share, with STT paid on both. Under grandfathering for shares acquired before 1 February 2018, what is the taxable long-term capital gain before applying the Rs 1.25 lakh exemption?

The taxable gain is nil. Under grandfathering, cost becomes the higher of actual cost Rs 300 and the lower of January 2018 price Rs 500 and sale price Rs 450, which is Rs 450. Since the sale price is also Rs 450, there is no gain or loss.

  1. ARs 0 (the gain is nil)Correct
  2. BRs 1,50,000
  3. CRs 1,00,000
  4. DRs 50,000

Explanation

Cost of acquisition is the higher of actual cost (Rs 300) and the lower of fair market value on 31 Jan 2018 (Rs 500) and sale value (Rs 450), i.e. Rs 450. Gain = 450 - 450 = nil. Using actual cost gives Rs 1,50,000; using FMV gives a loss that is not recognised via this route.

Did you get it right without looking?

One question tells you little. A timed set on Taxation of Equity Products shows your real accuracy, how long you take and where you lose marks.

Practise Taxation of Equity ProductsFree diagnostic mock

More Taxation of Equity Products questions