# Calculation of taxes on sale of shares where company spins off a business in separate entity

I invested in Motherson Sumi Systems Limited from 2017 to 2021. There were no new investment made after that. During last few years the company spun off the its wiring business into another entity called Motherson Sumi Wiring India Limited and renamed itself to Samvardhana Motherson International Ltd.

I got shares of Motherson Sumi Wiring India Limited in Mar'22 and it gave bonus shares in Nov'22. For Motherson Sumi Wiring India Limited shares my cost of acquisition was ₹ 0.

I am now looking sell all the shares of Samvardhana Motherson International Ltd and Motherson Sumi Wiring India Limited. How can I calculate taxes that I need to pay if sell now? Is there a utility available on the web somewhere that helps me do it? Also, do I get any indexation benefits as this will be LTCG?

• Since you are selling everything it is pretty straightforward - you invested X to begin with and sold it all for Y. Commented Jan 15 at 17:14

Selling of shares shall be taxable u/s 112A.

Indexation benefit is not available under this section however there is a grandfathering rule for computing your cost of acquisition. (This rule is applicable when shares are purchased before 1/4/2018)

# Computation of Capital Gain:

As per section 55 of Income Tax Act 1961, If section 112A is applied and asset is acquired before 1/2/2018 then cost of acquisition will be the higher of :

1. Actual purchase price
2. FMV as on 31/1/2018

However this utility of FMV @ 31/1/2018 is not available when you are selling your shares at loss.

FMV as on 31/1/2018 is basically the highest price quoted on 31/1/2018 in stock exchange. If there is no trading on 31/1/2018 then consider date immediately before 31/1/2018 when such shares were traded.

Further, in case of bonus share, your cost of acquisition will be Nil. So the whole consideration will be taxable u/s 112A.

# Computation of tax liability:

Computation of tax liability is straight forward when you have computed Capital gain.

Capital gain u/s 112A is taxable over the amount exceeding 1 lakh @10%. And you can also take benefit of basic exemption limit of 3 lakh or 2.5 lakh as the case may be depending on whether you are opting to file return under default provision of Income tax i.e. 115 BAC or shifting out of default taxation regime.

Also, rebate u/s 87A is not available against 112A income.