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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Capital Gains

Rohit, a resident individual, bought 10,000 listed equity shares in January 2017 at Rs 100 each. Their fair market value on 31 January 2018 was Rs 150 per share. He sold all of them on the stock exchange in 2025 at Rs 180 per share, with STT paid. Ignoring brokerage, surcharge and cess, and assuming he has no other capital gains that year, what is his tax on this sale? Assume LTCG on listed equity is taxed at 12.5% above an exemption of Rs 1,25,000.

The tax is Rs 21,875. Grandfathering fixes the cost at Rs 150 per share, giving a gain of Rs 3,00,000. After the Rs 1,25,000 exemption, Rs 1,75,000 is taxed at 12.5%. Using the original cost of Rs 100 would wrongly overstate the gain.

  1. ARs 21,875Correct
  2. BRs 84,375
  3. CRs 37,500
  4. DRs 35,000

Explanation

Under grandfathering, cost is the higher of actual cost (100) and the lower of FMV on 31 Jan 2018 (150) and sale price (180), which is 150. Gain = (180-150) x 10,000 = Rs 3,00,000. Taxable = 3,00,000 - 1,25,000 = 1,75,000, and 12.5% of that is Rs 21,875. Rs 84,375 results from using the actual cost of 100 and ignoring grandfathering.

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