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

Caselet: Mr. Anil Sharma (resident individual) buys unquoted equity shares of a closely held company for Rs 2,00,000 when their fair market value is Rs 3,10,000, from an unrelated seller. Case question: Under the provisions on property received for inadequate consideration, what is the amount taxable in Mr. Sharma's hands as Income from Other Sources?

Rs 1,10,000 is taxable. The difference between fair market value of Rs 3,10,000 and price paid of Rs 2,00,000 exceeds Rs 50,000, so the entire difference is taxed, not only the excess over the threshold and not the whole market value.

  1. ARs 1,10,000Correct
  2. BRs 60,000
  3. CNil
  4. DRs 3,10,000

Explanation

Difference = 3,10,000 − 2,00,000 = Rs 1,10,000. For movable property such as shares, the difference is taxable if it exceeds Rs 50,000. Since 1,10,000 exceeds 50,000, the full difference is taxed, not the excess of Rs 60,000. Rs 3,10,000 wrongly taxes the entire market value.

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