My father left me shares under his Will. Is capital gains tax payable on the full sale value?

You do not have to pay tax on the full amount of capital gains on selling inherited shares from your father. Today's Q&A answers a reader's query on this issue in detail.

Even though your actual cost of acquisition for the inherited shares is nil, the full amount realised on the sale of these shares will not be taxed as your capital gains.

For assets received as a gift from specified persons and as inheritance, the cost incurred by the previous owner for it is taken as the cost of acquisition of the person for calculating capital gains.

The period for which such assets are held by all the holders, beginning from the original buyer, is taken into account for determining whether the gains are is long term or short term.

As the total holding period, including the period for which the same was held by your father, exceeds 12 months, the capital gains are liable to be taxed as long-term capital gains.

If you sell these shares through a regulated platform on which Securities Transaction Tax (STT) is paid, the profits made on such sale will be taxed at a flat rate of 12.50% without indexation after the initial long-term capital gains of ₹1.25 lakh.

In case you sell these shares directly through off market deal on which STT is not paid, you will not get any tax exemption on the initial long-term capital gains of ₹1.25 lakh.

In case the shares were acquired before April 1, 2001, the fair market value on April 1, 2001, can be taken as the cost of acquisition for computing long-term capital gains.

In case of listed shares acquired before January 31, 2018, you can get the benefit of grandfathering, under which the highest market price of the shares on January 31, 2018, can be taken as the cost of acquisition if it is higher than your deemed cost of acquisition.

The market price on January 31, 2018, is the higher of the price on that date on the stock exchange on which the shares are traded.