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I want to buy a house in Canada by selling all my stocks in India. What will be my tax liability?



My stock portfolio is worth Rs 48 lakh. The shares were bought by my parents in India and gifted to me. I am currently employed in Canada. I want to buy a house in Canada by selling all my equity holdings in India. What will be my tax liability?

Amit Maheshwari, Partner, AKM Global:

When assets are inherited or gifted, and subsequently sold by the taxpayer, it gives rise to capital gains. The taxpayer will have to pay tax on short-term capital gains (STCG) or longterm capital gains (LTCG) depending on the profit from the sale of such assets as per the holding period. After the computation of capital gains, cost of acquisition, cost of improvement and any expenses related to the transfer of capital asset shall be deducted from the full value of consideration, that is, sales consideration. In the case of gift or inheritance, the purchase price of the previous owner is treated as the purchase price for computing capital gains of the taxpayer. Hence, to calculate the capital gains on the sale of the inherited share, the period of holding will commence from the original date of acquisition by your parents. The capital gain will be treated as short term if the period of holding is up to 24 months in case of unlisted shares, and 12 months in case of listed shares and securities. Generally, LTCG is taxable at the rate of 20% in case of unlisted shares and STCG is taxable at slab rate. However, the LTCG on listed equity shares and units of equity-oriented mutual funds would be taxable at the rate of 10% on the amount exceeding Rs 1 lakh, and at 15% on STCG in case of listed shares. Therefore, assuming that these are listed shares and have been held for more than a year, your tax liability is 10% on the capital gains earned on the sale of these shares. Further, for any shares bought by your parents before 1 February 2018, the cost of these shares would be considered as higher of the actual cost or the closing price of these shares as on 31 January 2018. Your residential status will not make a difference, whether you are based in Canada or India.

We are three brothers and have inherited an ancestral property that was purchased in Kolkata, in 1946. The land acquisition cost was Rs 10,000, and a two-storied house was built at a cost of Rs 14,000, in 1950. This year, the property was redeveloped, and the builder gave us Rs 45 lakh and three flats. I sold the flat for Rs 40 lakh in September 2023. My cash share was Rs 15 lakh, received in August 2023. What is my capital gains tax obligation?

Shubham Agrawal, Senior Taxation Adviser, TaxFile.in: The first part denotes the long-term capital gain on the sale of your right in the ancestral property which was held for more than 24 months. In this part, you received cash consideration and a flat in exchange for your rights in the ancestral property. To calculate this, you need to subtract your share (one-third) of the cost indexed fair market value of the ancestral property from the fair market value of the redeveloped flat on the date of allotment, and Rs 15 lakh cash received. The resultant value, if positive, will be subject to 20.8% long-term capital gains tax. The second part denotes the short-term capital gain on the sale of redeveloped flat since it was held for less than 24 months. In this part, you sold the asset as a part of the redevelopment agreement. To calculate this, you need to subtract the fair market value of the flat on the day of allotment from Rs 40 lakh sale consideration received. This value will be taxed at your slab rate.

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