I bought GOI strips (0 per cent coupon bonds) IN001223C030 in July 22. They mature in 2023. I understand that zero-coupon bonds are taxed as capital gains. Could you clarify this and whether the duration for considering it as LTCG is one year or three years?
Sashidhar
If a zero-coupon bond is held for 12 months or more, it is treated as a long-term capital asset. Proceeds on maturity less cost of acquiring the bonds will then be taxed as long-term capital gain. As per Section 112A of the Income Tax Act, 1961, the gain is taxable at the rate of 10 per cent (exclusive of applicable surcharge and cess). You may note that there are no indexation benefits and the gains up to ₹1 lakh is exempt from tax.
I had bought 300 shares of RIL at an average price of ₹2,235. I received 300 shares of Jio Financial Services on account of demerger at a pre-listing price of ₹261.85. I would like know the tax implication of RIL & JFSL if I sell these shares at a profit before one year and after one year of holding
Kollanandy Vasudevan
Tax implications when shares are sold
As per section 47(vid) of income tax act, receipt of 300 shares of Jio Financial Services on account of demerger is not treated as transfer and no capital gains. Taxability arises only when either the original shares or shares received on demerger are sold.
Holding period – more than one year
To classify whether the shares of resulting company are long term or short term, the holding period of original RIL shares shall be taken into account. Therefore, if the holding period is over one year then it will be regarded as long-term capital asset. Long-term capital gain is exempt up to ₹1 lakh a year; the gains exceeding ₹1 lakh are chargeable to tax at 10 per cent without indexation benefit.
On the other hand, if the holding period is less than 1 year, then the asset will be regarded as short term capital asset and the resulting gain will be taxable at the rate of 15 per cent as per Section 111A of the Income Tax Act, 1961.
The writer is Partner, Deloitte India