Open App

Taxation Exam > Taxation Notes > Income Tax for assessment (Inter Level) > Sale of Converted Securities - Taxation

Sale of Converted Securities - Taxation | Income Tax for assessment (Inter Level) PDF Download

Computation of capital gain in case of Sale of Converted Securities
1. As per section 47(x) conversion of bonds or debentures, or deposit certificate into shares or debentures of that company are not treated as transfer and hence no capital gain.
2. But if such converted shares or debentures are transferred subsequently then there arises capital gain whichis computed by following rules as shown under :
3. As per section 49(2A) Cost of acquisition of converted securities is cost of shares or debentures which has been appropriated towards the converted securities.

Q.1	Mr. X purchases 200 FCD for Rs. 70 each. 100% value of FCD is converted into equity shares. Determine the cost of acquisition of equity share.
A.1	It is not given how much FCD is getting converted to equity share. Therefore it is assumed that 1 FCD = 1 equity share. Cost of acquisition = 14,000 ÷ 200 = Rs. 70 per share. Suppose in the same question it is given 100% value of FCD is converted into 500 equity shares, then cost of acquisition = 14,000 ÷ 500 = Rs. 28 per share.
Q.2	Mr. X purchases 200 PCD for Rs. 70 each. 60% value of PCD is converted into equity shares. Determine the cost of acquisition of equity share and cost of debentures.
A.2	It is not given how much PCD is getting converted into equity share. Therefore it is assumed that 1 PCD = 1 equity share. Cost of acquisition of share = 60% of 14,000 ÷ 200 = Rs. 42 per share. Cost of acquisition of debenture = 40% of 14,000 ÷ 200 = Rs. 28 per debenture. Suppose in the same question it is given 60% value of PCD is converted into 500 equity shares and 40% of value of PCD to 150 debentures, then cost of acquisition of share = 60% of 14,000 ÷ 500 = Rs. 16.80 per share. Cost of acquisition of debenture = 40% of 14,000 ÷ 150 = Rs. 37.33 per debenture. Let us check it. 200 × 70 = 14,000 = (500 × 16.80) + (150 × 37.33) = 14,000.

4. To determine whether the asset is LTCA / STCA period of holding is taken from the date of allotment of original securities. (Rule 8AA w.e.f 17-3-2016)
5. Indexation is done from the year of sale of shares or debentures to year of conversion of shares.

The document Sale of Converted Securities - Taxation | Income Tax for assessment (Inter Level) is a part of the Taxation Course Income Tax for assessment (Inter Level).

All you need of Taxation at this link: Taxation

	Income Tax for assessment (Inter Level) 405 videos\|72 docs

Income Tax for assessment (Inter Level)

405 videos|72 docs

Join Course for Free

FAQs on Sale of Converted Securities - Taxation - Income Tax for assessment (Inter Level)

1. What are converted securities?

Ans. Converted securities are financial instruments that were initially issued as one type of security, such as bonds or preferred stock, but have been converted into another type of security, usually common stock. This conversion typically occurs based on predetermined terms and conditions.

2. How are the sale proceeds from converted securities taxed?

Ans. The taxation of sale proceeds from converted securities depends on various factors, including the holding period and the individual's tax bracket. If the converted securities were held for less than one year before the sale, the proceeds are generally taxed as short-term capital gains, which are subject to the individual's ordinary income tax rates. If the converted securities were held for more than one year, the proceeds may qualify for long-term capital gains treatment, which often results in lower tax rates.

3. Are there any tax implications when converting securities into another type?

Ans. The act of converting securities into another type does not typically trigger a tax liability. The tax implications usually arise when the converted securities are eventually sold. However, it is essential to consult with a tax professional or review the specific tax laws in your jurisdiction to fully understand the consequences of converting securities.

4. Can losses from the sale of converted securities be used to offset other gains?

Ans. Yes, losses from the sale of converted securities can generally be used to offset other capital gains. If the total losses exceed the gains, the excess losses can be used to offset ordinary income up to a certain limit. This limit is $3,000 for individuals and $1,500 for married individuals filing separately. Any remaining losses can be carried forward to future tax years.

5. Are there any special tax considerations for selling converted securities obtained through employee stock options or restricted stock units?

Ans. Yes, there are specific tax considerations for selling converted securities obtained through employee stock options or restricted stock units. These transactions may be subject to additional tax rules, such as the requirement to hold the securities for a specific period before qualifying for favorable tax treatment. It is crucial to consult with a tax advisor or review the applicable tax regulations to accurately determine the tax implications of selling such converted securities.

Related Exams

Taxation

About this Document

Nov 16, 2024 Last updated

Document Description: Sale of Converted Securities - Taxation for Taxation 2024 is part of Income Tax for assessment (Inter Level) preparation. The notes and questions for Sale of Converted Securities - Taxation have been prepared according to the Taxation exam syllabus. Information about Sale of Converted Securities - Taxation covers topics like and Sale of Converted Securities - Taxation Example, for Taxation 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises and tests below for Sale of Converted Securities - Taxation.

Introduction of Sale of Converted Securities - Taxation in English is available as part of our Income Tax for assessment (Inter Level) for Taxation & Sale of Converted Securities - Taxation in Hindi for Income Tax for assessment (Inter Level) course. Download more important topics related with notes, lectures and mock test series for Taxation Exam by signing up for free. Taxation: Sale of Converted Securities - Taxation | Income Tax for assessment (Inter Level)

Description

Full syllabus notes, lecture & questions for Sale of Converted Securities - Taxation | Income Tax for assessment (Inter Level) - Taxation | Plus excerises question with solution to help you revise complete syllabus for Income Tax for assessment (Inter Level) | Best notes, free PDF download

Information about Sale of Converted Securities - Taxation

In this doc you can find the meaning of Sale of Converted Securities - Taxation defined & explained in the simplest way possible. Besides explaining types of Sale of Converted Securities - Taxation theory, EduRev gives you an ample number of questions to practice Sale of Converted Securities - Taxation tests, examples and also practice Taxation tests

	Income Tax for assessment (Inter Level) 405 videos\|72 docs

Income Tax for assessment (Inter Level)

405 videos|72 docs

Join Course for Free

Download as PDF

Explore Courses for Taxation exam

Signup for Free!

Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.

Start learning for Free

10M+ students study on EduRev

MCQs

Semester Notes

Extra Questions

Free

Previous Year Questions with Solutions

Sale of Converted Securities - Taxation | Income Tax for assessment (Inter Level)

Viva Questions

Important questions

Sample Paper

past year papers

video lectures

mock tests for examination

practice quizzes

study material

ppt

Sale of Converted Securities - Taxation | Income Tax for assessment (Inter Level)

pdf

Objective type Questions

shortcuts and tricks

Exam

Summary

;

Additional Information about Sale of Converted Securities - Taxation for Taxation Preparation

Sale of Converted Securities - Taxation Free PDF Download

The Sale of Converted Securities - Taxation is an invaluable resource that delves deep into the core of the Taxation exam. These study notes are curated by experts and cover all the essential topics and concepts, making your preparation more efficient and effective. With the help of these notes, you can grasp complex subjects quickly, revise important points easily, and reinforce your understanding of key concepts. The study notes are presented in a concise and easy-to-understand manner, allowing you to optimize your learning process. Whether you're looking for best-recommended books, sample papers, study material, or toppers' notes, this PDF has got you covered. Download the Sale of Converted Securities - Taxation now and kickstart your journey towards success in the Taxation exam.

Importance of Sale of Converted Securities - Taxation

The importance of Sale of Converted Securities - Taxation cannot be overstated, especially for Taxation aspirants. This document holds the key to success in the Taxation exam. It offers a detailed understanding of the concept, providing invaluable insights into the topic. By knowing the concepts well in advance, students can plan their preparation effectively. Utilize this indispensable guide for a well-rounded preparation and achieve your desired results.

Sale of Converted Securities - Taxation Notes

Sale of Converted Securities - Taxation Notes offer in-depth insights into the specific topic to help you master it with ease. This comprehensive document covers all aspects related to Sale of Converted Securities - Taxation. It includes detailed information about the exam syllabus, recommended books, and study materials for a well-rounded preparation. Practice papers and question papers enable you to assess your progress effectively. Additionally, the paper analysis provides valuable tips for tackling the exam strategically. Access to Toppers' notes gives you an edge in understanding complex concepts. Whether you're a beginner or aiming for advanced proficiency, Sale of Converted Securities - Taxation Notes on EduRev are your ultimate resource for success.

Sale of Converted Securities - Taxation Taxation Questions

The "Sale of Converted Securities - Taxation Taxation Questions" guide is a valuable resource for all aspiring students preparing for the Taxation exam. It focuses on providing a wide range of practice questions to help students gauge their understanding of the exam topics. These questions cover the entire syllabus, ensuring comprehensive preparation. The guide includes previous years' question papers for students to familiarize themselves with the exam's format and difficulty level. Additionally, it offers subject-specific question banks, allowing students to focus on weak areas and improve their performance.

Study Sale of Converted Securities - Taxation on the App

Students of Taxation can study Sale of Converted Securities - Taxation alongwith tests & analysis from the EduRev app, which will help them while preparing for their exam. Apart from the Sale of Converted Securities - Taxation, students can also utilize the EduRev App for other study materials such as previous year question papers, syllabus, important questions, etc. The EduRev App will make your learning easier as you can access it from anywhere you want. The content of Sale of Converted Securities - Taxation is prepared as per the latest Taxation syllabus.

Education Revolution