I have queries regarding recent transaction I have done with one of stock.
I bought stock A at 668.9 qty 442=Rs 2,95,653.80.
Now company a company announced a stock split 1:10 ratio.
I got new additional share 3978 based on the ratio.
I sold original shares 69.80*442= Rs30,851.60
And then later date I sold additional shares @74*3978=Rs2,94,372.00
Now Question am I having capital gain or loss. What is the cost of acquisition for 3978 shares?
Cost of acquisition is Rs 2,95,653.80
On the paper, it is coming as a loss as shown below.
1)
Buy 442.00 66.89 29,565.38 - Please note price is considered as 66.89
Sell 442.00 69.80 30,851.60
Gain 1,286.22
Buy Cost of Acquisition – Proportioned apportionately (3978*66.89) Rs 29,565.38
Sell 3,978.00 74.00 Rs 2,94,372.00
Loss Rs-2,64,806.62
Total capital loss- Rs. -2,63,520.40 on paper coming.
In case a stock has undergone a split, then the date of acquisition of the split shares will be the same as the date of acquisition of the original shares. Also, you’ll have to do a proportionate cost adjustment to arrive at the acquisition cost of such split shares.
In this case, since your original purchase was at Rs.668.9 and the split ratio was 10:1, the cost of your split shares would be Rs.66.89 each.
For the sake of computing capital gains, it’s imperative that the date of acquisition be known. Since you’ve sold shares at 69.8 and at 74, your profits would be as under:
(a) Sale of original shares = (Sell price - Buy price)*Qty = (69.8-66.89)*442 = +1286.22
(b) Sale of split shares = (Sell price - Buy price)*Qty = (74-66.89)*3978 = +28283.58
Also, I have a doubt regarding ur statement. For both u have mentioned cost price as 66.89. Which is not proper I guess.
Imagine I bought this share in 2017 qty 442 @ 668.9 and share goes split 10:1 ratio. Now I sold only this shares on the same year and not split shares then. I have capital loss not gain.
So loss will be Rs. -2,64,799.95. In tradebook from where we create P&L Buy price will come as 668.9 and not 66.89.
Now next year I will sell remaining qty as 3978 as
Buy 3978.00 * 66.89 =Rs 2,66,088.42
Sell 3978.00 * 74.00 =Rs 2,94,372.00
Gain 28,283.58
Please note tradebook there will not be any buy transaction for 3978. Hence we have freedom select price. This is the original question what should be price ?
Bonus and stock split work differently. In Bonus the new shares are given at 0 cost, hence selling the original shares creates a capital loss. This is also called bonus stripping. When you book the capital loss when a stock goes through bonus to offset other capital gains.
In case a stock has undergone a split, then the date of acquisition of the split shares will be the same as the date of acquisition of the original shares. Also, you’ll have to do a proportionate cost adjustment to arrive at the acquisition cost of such split shares.
There won’t be any trades for this corporate action, you have to manually include this when filing your P&L. So you have to change your original trade of 442 at 668.9 into a trade of 4420 @ 66.89.
The tax position is quite different for sub-divided or split shares. All the shares are regarded as having been acquired when the original shares were acquired and the cost of the split shares is to be taken proportionate to the cost of the original shares. Unlike bonus shares, which are regarded as new shares separate from the original shares, the split shares are regarded as identical to the original shares, but with proportionate cost adjustment. Therefore, if you have held the original shares for at least 12 months, but sell the split shares within a few days of the stock split, the gains that you make would still be regarded as long term and would qualify for tax exemption.
I am not sure about modification in trade book as it looks to me document which acts as a proof of all trades happened. Icici direct has pdf document hence we can’t modify. Zerodha has provision to export in excel.
We can modify P&L as it calculated on tradebook. Currently my p&l is modified and price is 66.89 and not 668.9.
Now Imagine
I brought 442 @668.9=295651.55
after stock split sold only 442 @69.80=30851.6
Please note not sold extra share got 3978. Still they are in demat.
Now it will be loss of -Rs 264799.95 in P&L as in trade book 1 entry for buy of 442 and sell of 442. and no entry for 3978.
In such scenario are you suggesting to change P&L manually or it should go with trade records from tradebook.
Yeah you can change P&L manually. While filing your ITR, you just need to enter the capital gain amount. If tomorrow you are asked, you can always show the trades and the corporate action and how this was arrived at.
