My grandmother had bought some shares before 1980. My mother, who inherited it in 2021, gifted these to me and I sold it in January 2022 to buy a house. What will be the cost of acquisition (COA) of these shares? Also, will the gain be considered as LTCG or STCG?
— Harshit Doshi
Since the shares were purchased by your grandmother (being the original owner) which were then passed on to your mother under a will and then subsequently to you as a gift, the COA for such shares will be the cost at which your grandmother purchased such shares. However, since your grandmother purchased these shares before 1 April 2001, the COA will be fair market value (FMV) as on 1 April 2001 or the purchase price of the shares, whichever is higher.
Further, in case of equity shares that are listed in India, COA for computing LTCG shall be higher of FMV of shares as on 1 April 2001 or COA of original owner or FMV of shares as on 31 January 2018 (subject to maximum of sale price). Since your grandmother held the assets since 1970s-80s, which are sold in January 2022, the same shall qualify as long-term capital assets and the gains/ loss shall be LTCG/L.
I am a government employee and get a gross annual salary of ₹7,90,864. This includes an NPS (tier 1) contribution of ₹79,198, a premium of ₹7,800 towards medical insurance, and ₹50,000 each in PPF and NSC, respectively. I would like to know whether I can claim ₹29,198 deduction under section 80CCD(1B) as part of self NPS contribution and ₹1.5 lakh deduction under section 80C.
It is assumed that ₹79,198 towards NPS deducted from your salary, is your own contribution towards NPS and it does not represent employer contribution to NPS. As per the provisions of section 80CCD(1), an individual employed by the Central government on or after 1 April 2014 shall be allowed a deduction for the amount paid under the notified pension scheme (includes NPS) up to 10% of the defined salary (being basic and DA). Further, section 80CCD(1B) allows an additional deduction of ₹50,000 for employee contribution towards NPS, provided no deduction has already been considered under section 80CCD(1) for the same amount paid.
Accordingly, your NPS contribution of ₹79,198 may be bifurcated as ₹50,000 under section 80CCD(1) (assuming it is within 10% of the defined salary) and the balance of ₹29,198 under section 80CCD(1B), for the purpose of tax deduction. As your investments into funds eligible for deduction under section 80C is ₹150,000 ( ₹50,000 each in PPF, NSC, and NPS), you are eligible to claim the excess NPS contribution of ₹29,198 as a deduction under section 80CCD(1B). In case your employer is unable to consider the deduction in your payroll, you may consider the same under section 80CCD(1B) while filing your return of income.
Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.
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