If you have not done un-pledging then your fresh trade will be treated as BTST and you won’t be able to avail LTCG benefit rather LTCG Exemption limit benefit. For this additionally you have to unpledge on the day of fresh buy. Is this right @ShubhS9
Not if they are still pledged. From the sequence you described, only the new shares can be sold. You have to remove the pledge before you can sell old shares. And since you don’t do that, the old ones do not get sold first.
As to why you have not faced any problem: As @Jason_Castelino mentioned in a recent comment: income tax is self-assessment tax. So the department takes you at your word when you report your income tax liability; there is no automatic check for correctness at the time of reporting (which is: filing returns). But you are supposed to follow the tax laws when you do your computations.
My lay-person understanding is that you have been reporting STCG as LTCG when you do this (I am not sure if BTST gains count as STCG or speculative gains). If/when the IT department notices this, you will have to make amends.
I am not very sure over here. So I can just give my view.
As far as I understand he will get the benefit of LTCG. Pledge doesn’t matter. It’s always on FIFO basis. I do not think income tax act has mentioned about pledging anywhere in the provisions. In the absence of this information I am of the opinion that we can go for FIFO basis.
Further, each share has a distinctive number associated with it. When we pledge I do not think we pledge as per this number. I understand only the free shares can be sold and ones purchased last will be sold first. But for taxation purpose it will still be FIFO. Obviously I do not have any relevant provision to support the same. But I do get some help from Zerodha console because even here tax PL is calculated on FIFO basis irrespective of whether it’s pledged or not.
Common misconception people have is they think if their income tax return is processed successfully, then whatever they did is right. No. It need not be. Even brandy can cure your cold sometimes. But that doesn’t mean that’s the medicine.
Unless AO has reason to believe that you have declared incorrect income, your return is going to be processed with any hassle.
FIFO (First In First Out) method is followed for purpose of accounting and computing P&L. So when you sell shares, the shares that are not pledged will be debited from your holdings, and the shares that are pledged will have an average price of Rs. 140.