CA Intermediate · Taxation · Capital Gains
Meera Textiles Pvt Ltd (an unlisted company) allotted bonus shares to its shareholder Sanjay on 1 March 2026. The original shares had been bought by Sanjay in 2020. On 10 December 2026 Sanjay sold the bonus shares to an unrelated buyer for ₹2,40,000. How are the bonus shares treated for capital gains in tax year 2026-27?
The bonus shares are short-term and their cost is nil. The holding period starts from the date of allotment, 1 March 2026, giving about nine months, which is under 24 months for unlisted shares. With nil cost, the entire ₹2,40,000 is short-term capital gain.
- ALong-term capital asset, because the original shares were held for more than 24 months; cost of acquisition is the proportionate cost of the original shares
- BShort-term capital asset; cost of acquisition is nil, so the whole ₹2,40,000 is short-term capital gainCorrect
- CShort-term capital asset; cost of acquisition is the fair market value on the date of allotment
- DLong-term capital asset; cost of acquisition is nil, so ₹2,40,000 is long-term capital gain
Explanation
For bonus shares, the holding period runs from the date of allotment, not from the date of the original shares. Sanjay held them for about 9 months, which is below the 24 months required for unlisted shares, so they are short-term. The cost of acquisition of bonus shares allotted without payment is nil, so the gain is ₹2,40,000. Option 0 wrongly carries over the holding period of the original shares.
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