When a wife inherits her husband’s shares, what becomes her cost of acquisition?

It's not always easy to calculate tax liability for the shares inherited after the demise of one's spouse. There is often confusion around what the date and price of acquisition could be to determine total capital gains and whether they are short-term or long-term. Today's Q&A explains these in response to a reader's query.

In respect of the sale/transfer of capital assets received under a will or inheritance, the holding period for the legatee, who sells such capital asset, starts from the date on which the same was acquired by the previous owner who had paid for it.

Assuming that the shares were purchased by your husband, the period of your holding will start from the date on which the same were purchased by him. In respect of any bonus shares comprised in the portfolio, your holding period shall start from the date on which such bonus shares were issued.

As far as taking the cost of such shares being sold by you, the price which was paid by your husband will be taken as your cost.

In respect of shares acquired by your husband prior to 1 February 2018, the higher closing prices of these shares on the stock exchange on 31 January 2018 have to be taken as your cost for this purpose, including the bonus shares held as on that date.

In respect of bonus shares issued after 31 January 2018, the cost shall be taken as nil for calculation of capital gains.

In respect of shares bought before 1 February 2018, you have to enter the scrip-wise details in the ITR. But for the shares acquired after 31 January 2018, you need not disclose the break-up, and a consolidated number for sale consideration and purchase cost can be furnished in the ITR.

Here's a summary of the above for easy understanding: