There is no need to worry if you have inherited shares and wish to calculate capital gains, but don't know the original purchase price. Capital gains are the profits that investors earn after selling assets such as property or stocks. As per taxation laws, these gains are taxable depending on the holding tenure.
Inherited or gifted shares are not taxed immediately, but tax applies when they are sold. If one has inherited shares and wishes to calculate the capital gains, they will need to use the previous owner's cost. Otherwise, there is an option to take the market price of these shares on Jan. 31, 2018 as the cost for computing gains, including the bonus shares inherited.
In case of capital gains on tax, profits from listed shares held over 12 months are treated as long-term capital gains. The holding period includes the total ownership duration, counting all previous owners, up to the current holder.
If the details of acquisition are not known, the most recent investor has the option to take the market price of these shares on Jan. 31, 2018 as the cost for computing LTCG. This also includes the bonus shares inherited. For bonus shares received after Jan. 31, 2018, their cost is considered zero when calculating capital gains. To determine the history and number of bonus shares issued, one can consult the broker or look up the information online.
If someone has inherited shares and wants to pass it on to their children, it is advised to follow a proper process. For instance, there is no tax while inheriting shares. If these shares are passed onto children as gifts, still no tax applies. This is because gifts from close relatives such as parents are not treated as income.
However, the child who has inherited the shares will pay capital gains tax when selling. As a result, it is recommended to prepare a gift deed for proper documentation. If the child is a minor, any income from the shares will be added to the parent with higher income. As per laws, an exemption of up to Rs 1,500 per child applies when a minor's income is clubbed for tax purposes.
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