Company gone? Compensation for long-term capital loss on stocks with any LTCG

By Chirag Nangia

I am a promoter director in a company and own 16% unlisted shares bought for Rs 9 lakh in 1989. In the financial year 2021-22 the company disappeared. Can I claim Rs 9 lakh as long term losses and offset other long term gains?
—Anish Gupta

In accordance with the Income Tax Act, a capital gain or loss may be recognized following the transfer of capital property. Relevantly, “transfer” also includes the extinguishment of rights in the asset. Since the company has now disappeared, the shares will be considered extinguished and the resulting loss will be deductible from taxable income. Since the unlisted shares have been held for a period of more than 24 months, you will be able to apply the indexation on the original cost of Rs 9 lakh and claim the indexed cost as a long-term capital loss. This loss may be offset by other long-term capital gains. The unadjusted loss, if any, can be carried forward for the following eight years.

I sold an apartment in the last fiscal year. I plan to sell another and buy a new one this year. If the sale takes place in a different financial year, will there be any consequences for the capital gains to be offset against the new purchase?
—Murali Krishna

It has been held in court precedent that if a resident individual sells several residential properties and reinvests the proceeds to acquire a residential property, he is entitled to an exemption under Section 54 of the Income Tax Act . However, these sold residential properties must have been in the possession of the seller for more than two years. Also, capital gains may be deducted from the purchase of any residential property, if within one year before or two years after the date of transfer of the old house, the taxpayer acquires another residential house or must build a residential house within a period of three years from the date of transfer of the old house.

I bought an apartment two years ago and I want to sell it now. Will I get stamp duty benefits?
-Manoj Kumar

There are no provisions for concession of stamp duty payable when buying another residential property, when selling one. However, capital gains are exempt from tax if you buy another home within the year before or within two years of the transfer date. In the case of construction, the period is three years.

The screenwriter is the director, Nangia Andersen India. Send your questions to [email protected]

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