Ascertain the capital gains/loss on transfer of listed equity shares and units of equity oriented mutual fund (STT paid at the time of transfer of units) for the assessment year 2021-22 and also calculate tax liability,

For the purpose of computation of long term capital gains chargeable to tax u/s 112A of the Income-tax Act, 1961, the cost of acquisition in relation to the long term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust acquired before 1st February, 2018 shall be the higher of: Cost of acquisition of such asset, i.e. actual cost; and Lower of The fair market value of such asset as on 31st January 2018; and The full value of consideration received or accruing as a result of the transfer of the capital asset. The fair market value of listed equity shares as on 31st January, 2018 is the highest price quoted on the recognized stock exchange as on that date. Accordingly, long term capital gain on transfer of STT paid listed equity shares by Mr. Prasad would be determined as follows: The FMV of shares of A Ltd. would be ₹ 700, being the highest price quoted on National Stock Exchange on 31st January, 2018. The cost of acquisition of each equity share in A Ltd. would be ₹ 700, being higher of actual cost i.e., ₹ 400 and ₹ 700 (being the lower of FMV of ₹ 700 as on 31st January, 2018 (i.e. the highest trading price). The actual sale consideration is ₹ 1,200. Thus, the long term capital gain would be ₹ 1,50,000 i.e. (₹ 1,200 - ₹ 700) x 300 shares. The long term capital gain of ₹ 50,000 (i.e., the amount in excess of ₹ 1,00,000) would be subject to tax @ 10% under section 112A, without benefit of indexation. Accordingly the additional tax liability on account of this LTCG chargeable u/s 112A is ₹ 5,000 + 4% HEC i.e. ₹ 5,200. Note: To compute the tax liability it is presumed that Mr. Prasad would be having other income above the Maximum Exemption Limit i.e. ₹ 2,50,000 In the case of units listed on recognized stock exchange on the date of transfer, the FMV as on 31st January, 2018 would be the highest trading price on recognized stock exchange as on 31st January, 2018 (if units are listed on that date), else, it would be the net asset value as on 31st January, 2018 (where units are unlisted on that date). Accordingly, the FMV of units of Fund A as on 31st January, 2018 would be ₹ 750 (being the highest trading price on 31st January, 2018, since the units of Fund A are listed on that date) and the FMV of units of Fund B as on 31st January, 2018 would be ₹ 950 (being the net asset value as on 31st January, 2018, since the units of Fund B are unlisted on that date). The cost of acquisition of a unit of Fund A would be ₹ 750, being higher of actual cost i.e., ₹ 550 and ₹ 750 (being the lower of FMV of ₹ 750 as on 31st January, 2018 and actual sale consideration of ₹ 900). Thus, the long term capital gains on sale of units of Fund A would be ₹ 30,000 (₹ 900 - ₹ 750) x 200 units. The cost of acquisition of a unit of Fund B would be ₹ 900, being higher of actual cost i.e., ₹ 550 and ₹ 900 (being the lower of FMV of ₹ 950 as on 31st January, 2018 (net asset value) and actual sale consideration of ₹ 900). Thus, the long term capital gains on sale of units of Fund B would be Nil (₹ 900 - ₹ 900) x 200 units. Since the long term capital gains on sale of units is ₹ 30,000, which is less than ₹ 1,00,000, the said sum is not chargeable to tax under section 112A of the Income-tax Act, 1961.