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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Income from Other Sources

Caselet: Arjun, a resident individual, bought 1,000 unlisted shares of a private company from a non-relative for Rs 100 per share (Rs 1,00,000 total) when the fair market value per share, as per the prescribed rules, was Rs 180. Arjun's own other purchases are not relevant. Under the provision taxing property received for inadequate consideration, what amount is taxable in Arjun's hands as Income from Other Sources?

Rs 80,000 is taxable. The shares' fair value is Rs 1,80,000 against Rs 1,00,000 paid, a difference of Rs 80,000. Since it exceeds the Rs 50,000 threshold, which applies as a limit and not a deduction, the entire difference is taxed.

  1. ARs 80,000Correct
  2. BRs 1,80,000
  3. CRs 30,000
  4. DNil

Explanation

Fair value is 1,000 × 180 = Rs 1,80,000 and the consideration is Rs 1,00,000, so the difference is Rs 80,000. This exceeds the greater of Rs 50,000 and 10 percent of consideration (Rs 10,000), so the whole difference Rs 80,000 is taxable. Taxing only the excess over Rs 50,000 (Rs 30,000) is wrong because once the threshold is crossed the full difference is taxed.

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