My friend and I bought Apollo Hospitals shares, by contributing ₹125 each (total ₹250) during a public issue a few decades ago.. It was in joint name, and I was the first holder. We were allotted 25 shares with face value of ₹10 each and later on it became 50 shares with face value of ₹5 each.
We recently converted the shares from physical to electronic mode, through Cholamandalam Securities via demat account. Since both of us are senior citizens, we want to sell the shares during our time.
Now, I would like to raise the following queries and request you to kindly clarify:
1) When we sell the shares in the market now at a prevailing price of ₹5,540 approximately, the value of which will be around ₹2.77 lakh against the purchase value of ₹250, what will be the tax implication when we sell the shares and divide the profit?
2) Both of us are income-tax assessees. The amount, when sold, shall be credited to my bank account, since I’m the first holder. How do we divide it and declare in our annual returns when we file this year?
3) Do I have to pay the total tax, being first holder when I receive the full amount in my account after selling, and recover my friend’s part from him later?
Your guidance will be of great help as we are ignorant about the legal aspects. on laws
Sekar C R
In general, gains are taxed in the hands of the first holder. However, with the advent of PAN-based tracking and data collation, it is possible that these transactions are reported in the AIS (Annual Information Summary) of both joint holders. Hence, it is advisable to offer the gains to tax in the ratio in which each joint holder had contributed to the acquisition in the first place.
Capital gains will need to be computed as per the provisions of the Income-tax Act, 1961. Cost of acquisition can be indexed and the resulting gains (if any) would be taxable at 20 per cent (plus applicable surcharge and cess). Alternatively, if indexation benefit is not used, then the capital gains will be taxable at 10 per cent (plus applicable surcharge and cess) after exemption of ₹1 lakh.
The author is Partner, Deloitte India
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