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

Caselet: Mrs. Radha Iyer holds shares in a listed company that she bought on 15 January 2018 for ₹100 each. The highest price on 31 January 2018 was ₹160 and the price on that date was ₹150. She sells the shares at ₹210 on a recognised exchange in a later year, with STT paid. Under the grandfathering rule for gains up to 31 January 2018, what is the cost of acquisition per share for computing long-term gain?

The cost of acquisition is ₹160 per share. Under grandfathering, cost is the higher of actual cost and the lower of fair market value on 31 January 2018 and sale price. Fair market value is ₹160, below the sale price of ₹210, and above ₹100.

  1. A₹100
  2. B₹160Correct
  3. C₹150
  4. D₹210

Explanation

Cost is the higher of actual cost (₹100) and the lower of fair market value (highest price on 31 Jan 2018, ₹160) and sale price (₹210). Lower of 160 and 210 is 160; higher of 100 and 160 is ₹160. ₹150 mistakenly uses the closing price.

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