Company defunct? Set off long-term capital loss on shares against any LTCG

As per the Income Tax Act, capital gain or loss can be booked subsequent to transfer of a capital asset.

By Chirag Nangia

I am a promoter director in a company and hold 16% unlisted shares bought for Rs 9 lakh in 1989. In FY 2021-22, the company went defunct. Can I claim Rs 9 lakh as long-term losses and set off against other long-term gains?
—Anish Gupta
As per the Income Tax Act, capital gain or loss can be booked subsequent to transfer of a capital asset. Pertinently, “transfer” also includes extinguishment of the rights in the asset. As the company is now defunct, the shares will be considered as extinguished, and the resultant loss will be deductible from income chargeable to tax. Since the unlisted shares were held for a period more than 24 months, you shall be eligible to apply the indexation on original cost of Rs 9 lakh and claim the indexed cost as long-term capital loss. Such loss can be set off against other long-term capital gains. Unadjusted loss, if any, can be carried forward for the following eight years.

I sold a flat in the last financial year. I plan to sell another and buy a new one this year. If the sale is in a different financial year, will there be any implications on the capital gains to be set off with the new purchase?
—Murali Krishna
It has been held in a judicial precedent that if a resident individual sells multiple residential properties and re-invests the proceeds to acquire a residential property, he is entitled for exemption under Section 54 of the Income Tax Act. However, such residential properties sold should have been in possession of the seller for more than two years. Further, the capital gains can be set off against the purchase of any residential property, if within a period of one year before or two years after the date of transfer of old house, the taxpayer acquires another residential house or should construct a residential house within a period of three years from the date of transfer of the old house.

I purchased a flat two years ago and want to sell it now. Will I get any benefits in stamp duty?
—Manoj Kumar
There are no provisions for concession in stamp duty payable at the time of purchase of another residential property, upon sale of one. However, capital gains is tax exempt if you buy another house within one year before or two years from the date of transfer. In case of construction, the time limit is three years.

The writer is director, Nangia Andersen India. Send your queries to fepersonalfinance@expressindia.com