How cost price of an share is calculated in case of IPO
We apply for IPO and we get allotted with the stocks during IPO.There are good changes that the equity we subscribed might launch atpremium than the offer price. But sometimes the share prices plungeafter the initial launch. Most of us have a question, how the costprice, date of purchase is determined for a respective equity in thisscenario.
Click here for more on capital gains and how income from shares and mutual funds are taxed in India.
* Updated for FY 2009 – 2010
For more blogs visit http://www.robotax.in/blogs/
That’s why we have come up with a simple table that will analyzevarious scenario and explain how the cost price, capital gain tax isapplied to an IPO allotted equity.
| No | Particulars | Offer Price | Launch Price (end of 1st day closing) | Scenario | Taxable Component |
| 1 | Company ‘A’ has launched IPO | Rs.310 | Rs.450 | You sold the share on day of launch for Rs. 440 | Offer Price will be treated as cost price. Date of Allotment will be date of purchase. The profit on sale(Rs.440- Rs.310 ) i.e Rs.130 will be taxed at 15% as short term capitalgains since the shares were sold within twelve months from the date ofallotment. |
| 2 | Company ‘B’ has launched IPO | Rs.45 | Rs.35 | You sold the share after a week of launch for Rs.30, incurring a loss. | The loss on sale (Rs.30-Rs.45) i.e Rs.15will be treated as short term capital loss and set off against gainsfrom short term capital asset and or gains from any other long termcapital assets in the same assessment year. Short term capital loss which cannot be set off inthe same assessment year can be carried forward and set off againstincome from short term capital gains and long term capital gains in thesubsequent years. |
| 3 | Company ‘C’ has launched IPO | Rs.125 | Rs.175 | You sold the share after 13 months for Rs. 300 | Since it has been sold after 12 months, itwill be long term capital gain. If the sale is made through the stockexchanges and STT (Securities Transaction Tax)is paid the capital gainwill be exempt from tax. |
* Updated for FY 2009 – 2010
For more blogs visit http://www.robotax.in/blogs/
|
|
