Tax Treatment of Capital Gain on the sale of unlisted shares

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  1. P. Gurunathan

    P. Gurunathan New Member

    Dear Sir,

    At the outset, let me thank you for this excellent opportunity to seek clarifications and valuable guidance.

    In September, 2006 I invested Rs 20 lacs in a private limited company which owns and operates a hospital in a southern Indian City. For this investment, I was issued 2,00,000 shares of Rs.10 each, which is the nominal value of each share

    Recently, someone offered to buy me these shares by paying to Rs. 40 lacs.

    1. If I sell these shares,

    A. do I need to pay any capital gain tax?

    B. if so, at what rate.

    2. In case I need not pay any capital gain tax, do I have to report this in my annual tax return?

    3. If tax is payable, is there any tax saving method or option? And if so, what are they?

    4. If I choose any tax saving option, do I have to report that also in the annual tax return.

    I will be very grateful for your clarification and guidance in this regard.

    Thanks and Best Regards,

    Gurunathan
     
  2. Yatin Gandhi

    Yatin Gandhi Active Member

    1. Long Term Capital Gains Tax would be applicable in this case
    2. Tax @ 20% would be applicable
    3. You can save tax by reinvesting in Residential Property or Bonds. Refer: http://www.charteredclub.com/section-54/
    4. Yes, if you claim exemption - you will have to report it in the ITR
     
  3. P. Gurunathan

    P. Gurunathan New Member

    Thanks a lot for your very prompt response and clarifications
     
  4. P. Gurunathan

    P. Gurunathan New Member

    I am told by another person to select the Index Option, where by I will pay only minimum amount of tax @20% since most of the capital gain will get eroded in the inflation adjusted value. My investment has been held for nearly 10 years, and the gain is only 100% for 10 years.

    I hope that he is correct.

    Best Regards,

    Gurunathan
     
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