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CA Intermediate · Taxation · Capital Gains

Rohan received unlisted shares of a private company as a gift from his father in tax year 2021-22. His father had bought them in 2019 for ₹6,00,000, and their fair market value on the date of the gift was ₹8,00,000. Rohan sold them in tax year 2026-27 for ₹10,50,000 and paid brokerage of ₹50,000 on the sale. What is his capital gain, and of what nature?

The gain is a long-term capital gain of ₹4,00,000. The cost is the donor's cost of ₹6,00,000, and the donor's holding period counts, so the shares are long-term. Gain is ₹10,50,000 less brokerage ₹50,000 less ₹6,00,000.

  1. ALong-term capital gain of ₹4,00,000Correct
  2. BLong-term capital gain of ₹2,00,000
  3. CShort-term capital gain of ₹4,00,000
  4. DLong-term capital gain of ₹4,50,000

Explanation

For a gifted asset, the cost is the previous owner's cost of ₹6,00,000 and the holding period includes the donor's period. The holding since 2019 exceeds 24 months, so the gain is long-term. Gain = 10,50,000 - 50,000 - 6,00,000 = ₹4,00,000. Using the ₹8,00,000 fair market value gives ₹2,00,000, which is wrong because the gift is not taxed as a transfer. Ignoring the brokerage gives ₹4,50,000, which is wrong because transfer expenses are deductible.

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