Income Tax on Capital Gain in India

What is a capital asset for the purpose of charging tax on capital gains ?

In taxation, a capital asset refers to any property or investment that an individual or entity owns for personal or investment purposes. Examples of capital assets can include real estate, stocks, bonds, mutual funds, and artwork.

When a capital asset is sold, the difference between the Purchase price (also known as the “Cost Of Acquisition”) and the Sale Consideration, is known as a Capital Gain (if the sale price is higher than the Cost Of Acquisition) or a capital loss (if the sale price is lower than the Cost Of Acquisition). Capital gains are usually subject to taxation, and the rate of tax depends on various factors, such as the type of asset and the holding period.

In general, long-term capital gains (i.e., gains from the sale of assets held for more than two  years) are taxed at a lower rate than short-term capital gains (i.e., gains from the sale of assets held for less than two years or less). 

Whether profit on sale of a car which is personal effect of the assessee would be subject to capital gain tax?

In general, the sale of a personal car by an individual would not be subject to capital gains tax. This is because a personal car is considered a personal-use asset and is therefore exempt from capital gains tax under most tax systems.

However, there may be some exceptions to this rule. For example, if the car was used for business purposes (e.g., as a delivery vehicle or as part of a ride-sharing service), then any profit from the sale of the car may be subject to taxation as business income rather than as a capital gain. Similarly, if the car was owned by the individual for investment purposes (e.g., as part of a collection of classic cars), then any profit from the sale of the car may be subject to taxation as a capital gain.

Whether Equity Shares or Mutual Funds can be treated as personal effects of the Taxpayer or Investor?

Equity shares and Mutual Funds are considered capital assets under Indian income tax laws. When these assets are sold, the difference between the sale price and the purchase price is treated as capital gains or losses, which are subject to tax. As per the Income Tax Act, 1961, personal effects such as clothes, furniture, and other household articles are exempt from tax. However, equity shares and Mutual funds cannot be treated as personal effects for the purpose of calculating capital gains tax. When a taxpayer sells equity shares or Mutual Funds,, the gains or losses arising from the sale are classified as long-term or short-term capital gains or losses, depending on the period of holding of the asset. Long-term capital gains are taxed at a lower rate than short-term capital gains. In conclusion, equity shares and Mutual Funds cannot be treated as personal effects for capital gains tax purposes in India.

What does transfer mean for the purpose of charging tax on capital gain?

For the purpose of charging tax on capital gains, the term “transfer” generally refers to the act of transferring or disposing of a capital asset. This can include selling, exchanging, gifting, or otherwise transferring ownership or control of the asset.

In India, transfer, for the purpose of charging tax on capital gains, is defined under Section 2(47) of the Income Tax Act, 1961. The section defines transfer as follows:

“Transfer”, in relation to a capital asset, includes the sale, exchange, relinquishment, or extinguishment of any rights in the asset, or the compulsory acquisition thereof under any law, or the conversion of the asset into stock-in-trade of a business carried on by the taxpayer. It also includes the transfer of a capital asset by a person to a firm or other association of persons or body of individuals, and the transfer of a share or interest in a partnership firm to another partner in the firm.”

Thus, transfer for the purpose of charging tax on capital gains includes not only sale or exchange of the asset but also other modes such as relinquishment or extinguishment of any rights in the asset. It also includes compulsory acquisition of the asset under any law and conversion of the asset into stock-in-trade. Additionally, transfer of a capital asset to a firm, association of persons or body of individuals, or transfer of a share or interest in a partnership firm to another partner is also considered as transfer under the income tax laws. When a taxpayer transfers a capital asset, the gains or losses arising from the transfer are classified as long-term or short-term capital gains or losses, depending on the period of holding of the asset. Long-term capital gains are taxed at a lower rate than short-term capital gains.

In which year of Assessment , Capital Gains should be considered, in case of transfer of immovable property, where part payment is received and possession to buyer, is handed over? Will it make any difference if registration of sale deed has not yet been made?

The year of assessment for capital gains tax in the case of transfer of immovable property would depend on the timing of the transfer and the receipt of payment. In general, for tax purposes, a transfer is considered to have taken place when the ownership of the property is transferred, regardless of whether or not the registration of the property has been completed.

If a part payment is received and possession of the property is handed over in a particular tax year, the capital gains tax liability for that transaction would generally be calculated in that tax year. The amount of the capital gain would be determined by subtracting the cost of acquisition and any other allowable expenses from the sale proceeds received during that financial year.

According to the Indian Income Tax Act, capital gains on transfer of immovable property should be considered in the year in which the transfer takes place. In the case of transfer of immovable property where part payment is received and possession is handed over to the buyer, the transfer is deemed to have taken place in the year in which possession is handed over.

The registration of the sale deed is not relevant for the purpose of determining the year of transfer and tax liability on capital gains. Even if the sale deed has not been registered, the transfer is deemed to have taken place in the year in which possession of the property is handed over to the buyer.

In such cases, the taxpayer should calculate the capital gains based on the fair market value of the property at the time of transfer, i.e., the year in which possession is handed over, and deduct the cost of acquisition and improvement expenses incurred, if any. The resulting amount will be the capital gains, which will be taxed as per the applicable rates.

It is important to note that if the property is held for more than two years before transfer, the gains will be classified as long-term capital gains, and if held for less than two years, the gains will be classified as short-term capital gains. Long-term capital gains are taxed at a lower rate than short-term capital gains.

Which transactions related to transfer of capital assets do not result in taxable capital gain in India?

Under the Indian Income Tax Act, there are certain transactions related to the transfer of capital assets that do not result in taxable capital gains. These are as follows:

1. Transfer of assets as a result of inheritance or gift: If a capital asset is received as an inheritance or gift, it is not considered as a transfer and, therefore, no capital gains tax is levied.

2. Transfer of assets in a scheme of amalgamation or merger: When a company is merged or amalgamated with another company, the transfer of capital assets as a result of such merger or amalgamation is not considered as a transfer, and hence, no capital gains tax is levied.

3. Transfer of assets in a demerger: In a demerger, where a company transfers one or more of its undertakings to another company, the transfer of capital assets as a result of such demerger is not considered as a transfer, and hence, no capital gains tax is levied.

4. Transfer of assets between holding and subsidiary companies: The transfer of capital assets between a holding company and its subsidiary company, or between two subsidiary companies of the same holding company, is not considered as a transfer, and hence, no capital gains tax is levied.

5. Transfer of certain securities: The transfer of government securities, such as bonds issued by the central or state government, and specified instruments such as 7.75% Gold Bonds, Capital Gains Bonds, etc., are exempt from capital gains tax.

6. Transfer of agricultural land in certain cases: The transfer of agricultural land situated in a rural area in India is exempt from capital gains tax if it is held for more than two years and used for agricultural purposes for at least two years prior to the transfer.

It is important to note that even if a transfer of capital asset falls under one of the above exemptions, it is still necessary to report such transactions in the tax return as per the prescribed guidelines.

What is the Long Term & Short Term Capital gain?

Long-term capital gain is a type of capital gain that is realized from the sale or disposition of an asset that has been held for a certain period of time, typically more than one year. The tax treatment of long-term capital gains is generally more favorable than that of short-term capital gains.

Long-term capital gain refers to the profit or gain arising from the transfer of a capital asset that is held for a specific period of time. The classification of a gain as long-term or short-term depends on the holding period of the asset.

In India, for most capital assets, including shares, mutual funds, and immovable property, the holding period required to qualify as long-term capital gain is more than 24 months (earlier, it was 36 months until March 31, 2017). If the asset is held for 24 months or less, the gain is considered short-term capital gain.

For listed equity shares, units of equity-oriented mutual funds, and listed securities like bonds or debentures, the holding period required for long-term capital gains is reduced to 12 months.

The tax treatment of long-term capital gains differs from short-term capital gains. Long-term capital gains are usually taxed at a lower rate than short-term capital gains.It also to be noted that long-term capital gains on listed equity shares and equity-oriented mutual funds were exempt from tax up to a certain limit. However, please note that tax laws are subject to change, and it is advisable to refer to the latest provisions and consult a tax consultant or practicing Chartered Accountant for accurate and up-to-date information on tax rates and exemptions related to long-term capital gains in India.

How capital gains are computed?

In India, capital gains are computed as per the provisions of the Income Tax Act, 1961. The computation of capital gains involves the following steps:

1. Determine the nature of capital asset: Capital asset refers to any property held by the taxpayer, whether movable or immovable, tangible or intangible, but does not include stock-in-trade, consumable stores, or personal effects. The nature of the asset determines the tax treatment of the capital gains.

2. Calculate the sale price: The sale price refers to the consideration received or accrued as a result of the transfer of the capital asset.

3. Determine the cost of acquisition: The cost of acquisition refers to the cost incurred to acquire the capital asset, including the purchase price, any incidental expenses incurred in acquiring the asset, and any improvement expenses incurred subsequently.

4. Calculate the indexed cost of acquisition: The indexed cost of acquisition is the cost of acquisition adjusted for inflation using the Cost Inflation Index (CII) published by the Income Tax Department. The indexed cost of acquisition is calculated by multiplying the cost of acquisition by the ratio of the CII for the year of transfer and the CII for the year of acquisition.

5. Determine the cost of improvement: If any improvement expenses were incurred subsequent to the acquisition of the asset, such expenses are added to the cost of acquisition to arrive at the total cost of acquisition.

6. Calculate the indexed cost of improvement: Similar to the indexed cost of acquisition, the indexed cost of improvement is calculated by multiplying the cost of improvement by the ratio of the CII for the year of transfer and the CII for the year of improvement.

7. Calculate the capital gains: The capital gains are computed as the difference between the sale price and the indexed cost of acquisition and the indexed cost of improvement.

8. Apply the tax rate: The tax rate applicable to capital gains depends on the nature of the asset and the holding period of the asset. For example, long-term capital gains are usually taxed at a lower rate than short-term capital gains.

It is important to note that the above steps are general guidelines, and there may be specific provisions and exceptions applicable to different types of assets and transactions. It is advisable to refer to the latest provisions and consult a tax professional or the Income Tax Consultant for accurate and up-to-date information on the computation of capital gains in India.

What is the Cost Inflation Index (CII)?

The Cost Inflation Index (CII) in India is a measure of inflation as notified by the Central Government. It is used to adjust the cost of acquisition of a capital asset for inflation while computing the capital gains for tax purposes. The CII is published by the Central Board of Direct Taxes (CBDT) every year and is based on the changes in the Wholesale Price Index (WPI) of the previous year.

The CII is used to adjust the cost of acquisition of a capital asset for inflation so that the capital gains can be computed accurately. When a capital asset is sold, the gain arising from the transfer is computed by deducting the indexed cost of acquisition from the sale price. The indexed cost of acquisition is the cost of acquisition adjusted for inflation using the CII.

For example, suppose a taxpayer purchased a property in 2010-11 for Rs. 50 lakh and sold it in 2021-22 for Rs. 1 crore. The CII for 2010-11 was 167, and for 2021-22, it was 317. The indexed cost of acquisition would be calculated as follows:

Indexed Cost of Acquisition = Cost of Acquisition x (CII for year of transfer/CII for year of acquisition)

= Rs. 50 lakh x (317/167)

= Rs. 95.21 lakh

In this example, the capital gains would be calculated as the difference between the sale price of Rs. 1 crore and the indexed cost of acquisition of Rs. 95.21 lakh.

The use of CII ensures that the impact of inflation is adjusted while computing the capital gains, and the taxpayer is taxed only on the real gains earned on the capital asset.

Mr. Maakhan Singh has sold a property in March 2013 at a sale consideration of Rs.10,00,000 (Rupees Ten Lakhs). Mr. Maakhan Singh, has acquired this property in March 2005 by the way of Gift from his Mother, who had acquired the same in January 1995 at a cost of Rs. 1 lakh. What will be the Capital Gain in the hands of Mr. Maakhan Singh? Registration of the property was also completed at a valuation of Rs.10 lakh.

To calculate the capital gain in the hands of Mr. Maakhan Singh, we need to first determine the cost of Acquisition of the property, taking into account the fact that it was received as a gift.

As per Indian tax laws, when a person receives an immovable property as a gift, the cost Cost Of Acquisition of the property is the same as the cost of Acquisition that the original owner had in the property. In this case, Mr. Singh’s mother acquired the property in January 1995 for a cost of Rs. 1 lakh. Therefore, Mr. Singh’s Cost Of Acquisition of the property is also Rs. 1 lakh.

Next, we need to calculate the indexed cost of acquisition. Since Mr. Maakhan acquired the property in March 2013, we need to adjust the  Cost Of Acquisition for inflation using the cost inflation index (CII) for the relevant years. The CII for the year 1995-96 was 281, and for the year 2012-13 was 852. Therefore, the indexed cost of acquisition will be:

Indexed cost of acquisition = Cost Of Acquisition x (CII for year of sale/CII for year of acquisition)

= Rs. 1 lakh x (852/281)

= Rs. 3,03,20

Finally, we need to calculate the capital gain. As per the information provided in the question, the property was sold for Rs. 10 lakh in March 2013. Therefore, the capital gain will be:

Capital gain = Sale price – Indexed cost of acquisition – Cost of improvement, if any

= Rs. 10 lakh – Rs. 3,03,200 – Cost of improvement, if any

If there were no further improvements made to the property, the capital gain in the hands of Mr. Singh would be Rs. 6,96,800. This capital gain would be subject to long-term capital gains tax, since the property was held for more than 2 years. It should be noted that the long-term capital gains tax rate for immovable property in India is 20%, plus applicable surcharge and cess.

At what Rate capital gain is taxed?

The tax rate for capital gains depends on whether the gains are short-term or long-term, and on the type of asset that is being sold.

Short-term capital gains are gains on assets that are held for less than 2 years (or 1 year in the case of listed securities), while long-term capital gains are gains on assets that are held for more than 2 years (or more than 1 year in the case of listed securities).

In India, the tax rates for short-term capital gains are the same as the income tax rates for the individual taxpayer. For the financial year 2021-22 (assessment year 2022-23), the income tax rates for individuals are as follows:

• Up to Rs. 2.5 lakhs: Nil
• Rs. 2.5 lakhs to Rs. 5 lakhs: 5%
• Rs. 5 lakhs to Rs. 7.5 lakhs: 10%
• Rs. 7.5 lakhs to Rs. 10 lakhs: 15%
• Rs. 10 lakhs to Rs. 12.5 lakhs: 20%
• Rs. 12.5 lakhs to Rs. 15 lakhs: 25%
• Above Rs. 15 lakhs: 30%

For long-term capital gains on equity shares and equity-oriented mutual funds, the tax rate is 10% (plus applicable surcharge and cess), if the gains exceed Rs. 1 lakh in a financial year. For long-term capital gains on other assets such as real estate, the tax rate is 20% (plus applicable surcharge and cess).

It’s important to note that these tax rates are subject to change from year to year, so it’s always best to check the latest tax laws and rates before making any investment decisions.

How much tax is to be paid by Non- Resident on long term capital gain arising from the transfer of  unlisted securities in India?

The tax on long-term capital gains arising from the transfer of unlisted securities by non-residents in India depends on whether the non-resident taxpayer is eligible for tax treaty benefits or not.

If the non-resident taxpayer is eligible for tax treaty benefits, then the tax rate on long-term capital gains would be the rate specified in the relevant tax treaty. For example, if the non-resident taxpayer is a resident of a country that has a tax treaty with India that provides for a lower tax rate on long-term capital gains, then the non-resident taxpayer would be liable to pay tax at that lower rate.

If the non-resident taxpayer is not eligible for tax treaty benefits, then the tax rate on long-term capital gains would be 20% (plus applicable surcharge and cess) of the capital gains.

It’s important to note that non-resident taxpayers are also required to comply with other tax provisions such as obtaining a Permanent Account Number (PAN) in India, filing a tax return, and paying the tax due. Non-compliance with these provisions can result in penalties and other consequences.

What are the provisions for exemption of long term capital gains on equity shares and units of equity oriented fund?

In India, long-term capital gains (LTCG) on equity shares and units of equity-oriented funds are eligible for exemption under certain conditions. The relevant provisions are provided under section 10(38) of the Income Tax Act, 1961.

As per these provisions, LTCG arising from the sale of equity shares or units of equity-oriented funds that are held for a period of more than 1 year are exempt from tax, provided the following conditions are satisfied:

1. The sale of equity shares or units of equity-oriented funds must be executed on or after April 1, 2018.
2. The equity shares or units of equity-oriented funds must be listed on a recognized stock exchange in India.
3. Securities Transaction Tax (STT) must be paid at the time of sale.

If these conditions are met, the LTCG on equity shares or units of equity-oriented funds will be fully exempt from tax, without any upper limit. However, the LTCG will be considered while computing the total income of the taxpayer, and the taxpayer will be required to file an income tax return disclosing the exempted LTCG.

It’s important to note that these provisions are subject to change, and it’s always advisable to check the latest tax laws and rules before making any investment decisions.

What are the new  tax provisions for concessional rate of income tax on short term capital gains on equity shares or units of equity oriented fund?

As per the Finance Act, 2021, a new provision has been introduced to provide a concessional tax rate on short-term capital gains arising from the transfer of listed equity shares or units of an equity-oriented fund (where Securities Transaction Tax (STT) is paid at the time of acquisition and transfer of such shares or units) for certain taxpayers. The new provision applies for the assessment year 2022-23 onwards.

The concessional tax rate is available for individual taxpayers, Hindu Undivided Families (HUFs), and Association of Persons (AoPs). The tax rate is as follows:

• 15% of the short-term capital gains if the total income of the taxpayer does not exceed Rs. 2.5 lakhs
• 25% of the short-term capital gains if the total income of the taxpayer exceeds Rs. 2.5 lakhs but does not exceed Rs. 5 lakhs
• Regular tax rate if the total income of the taxpayer exceeds Rs. 5 lakhs

It is important to note that this concessional tax rate is applicable only to short-term capital gains on the transfer of listed equity shares or units of an equity-oriented fund, where STT is paid at the time of acquisition and transfer of such shares or units. For other types of assets or securities, the regular tax rates for short-term capital gains would apply.

An assessee derived a long term gain of Rs 1 crore on the sale of bonus shares and suffered a loss after induction of Rs 90 lakh on sale of other shares and claimed the set off between the two. He also claimed the benefit of proviso to sec .112 i.e. tax@10% without indexation. As per Assessing Officer, Since the tax is paid @10 %,  the indexation benefit of shares on which loss was incurred is not available. Is the claim of AO correct ?

No, the claim of the AO is not correct. According to the proviso to section 112 of the Income Tax Act, if an assessee opts to pay tax at the rate of 10% on long-term capital gains from the sale of listed equity shares or units of equity-oriented funds, the benefit of indexation of cost of acquisition and improvement is not available. However, this does not mean that the benefit of set off of long-term capital loss against long-term capital gains is disallowed. The set off of long-term capital loss against long-term capital gains is allowed even if the tax is paid at the concessional rate of 10% without indexation. Therefore, the AO’s claim that the indexation benefit of shares on which loss was incurred is not available is incorrect.

What are the provisions for exemption of long term capital gains relating to BSE 500 and other specified shares of listed companies?

As per the Finance Act 2018, the provisions for exemption of long-term capital gains for BSE 500 and other specified shares of listed companies are as follows:

1. Long-term capital gains arising from the transfer of listed equity shares or units of equity-oriented funds on or after 1st April 2018 will be taxable at 10% if the gains exceed Rs.1 lakh in a financial year.
2. Long-term capital gains up to Rs.1 lakh in a financial year will continue to be exempt from tax.
3. The cost of acquisition of such shares or units acquired before 31st January 2018 will be deemed to be the higher of actual cost of acquisition or the fair market value as on 31st January 2018.
4. The cost of acquisition of such shares or units acquired on or after 1st February 2018 will be the actual cost of acquisition.
5. The indexation benefit will be available up to 31st January 2018, and after that, the gains will be taxed at the rate of 10% without indexation.
6. The securities transaction tax (STT) paid at the time of acquisition and sale of such shares or units will be considered as a deductible expenditure.

It is important to note that the above provisions are subject to certain conditions and exceptions and it is advisable to consult a tax expert for a detailed understanding of the same.

An assessee transferred its share being a long term asset into stock in trade. Later those shares were sold from the stock in trade through a recognised stock exchange paying STT.  Can assess claim exemption u/s 10 ( 38 )for the long term capital gain arising on conversion of capital asset into stock in trade ?

No, the assessee cannot claim exemption u/s 10(38) for the long term capital gain arising on the conversion of a capital asset into stock in trade and subsequent sale of such shares.

Section 10(38) provides for exemption from tax on long term capital gains arising from the transfer of equity shares or units of an equity-oriented fund, subject to certain conditions. However, in this case, the capital asset was converted into stock in trade, which means that it is held as inventory for the purpose of trading.

Further, when such shares are sold from the stock in trade through a recognized stock exchange, the profits or gains arising from such sale will be treated as business income and not as capital gains. Hence, the exemption under section 10(38) cannot be claimed in such a scenario.

What are the provisions of section 50C for computing capital gain on the transfer of land and building?

Section 50C of the Income Tax Act, 1961 provides for the computation of capital gains arising from the transfer of land and building. It applies when the consideration received or accruing from the transfer of land or building is less than the value adopted by the stamp valuation authority for the purpose of payment of stamp duty.

According to section 50C, the value adopted by the stamp valuation authority for the purpose of payment of stamp duty shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the land or building. This means that if the consideration received or accruing as a result of the transfer is less than the value adopted by the stamp valuation authority, then the value adopted by the stamp valuation authority will be deemed to be the full value of the consideration for the purpose of computing capital gains.

For example, if an individual sells a property for Rs. 50 lakhs, but the stamp valuation authority has determined the value of the property at Rs. 60 lakhs, then for the purpose of computing capital gains, the full value of consideration will be deemed to be Rs. 60 lakhs. So, the capital gain will be computed based on the deemed consideration of Rs. 60 lakhs instead of the actual consideration of Rs. 50 lakhs.

Where the Sale consideration of transfer of capital asset is not ascertainable or cannot be determined or not known, does any capital gain arise ?

Yes, as per section 50D of the Income Tax Act, 1961, if the consideration received or accruing as a result of the transfer of a capital asset is not ascertainable or cannot be determined or is not known, then the fair market value (FMV) of the asset on the date of transfer will be deemed to be the full value of consideration. The capital gain will be computed on the Cost Of Acquisition of such deemed full value of consideration. This provision is applicable to all types of capital assets including land, building, securities, etc.

If  an investment was made in units of equity linked saving scheme (ELSS) and deduction was claimed u/s 80CCB, what will be the treatment on repurchase or maturity of the same ?

If an investment was made in units of Equity Linked Saving Scheme (ELSS) and deduction was claimed under section 80CCB of the Income Tax Act, 1961, the treatment on repurchase or maturity of the same would be as follows:

1. Repurchase before completion of the lock-in period: If the units are repurchased or redeemed before the completion of the lock-in period of 3 years from the date of investment, the deduction claimed under section 80CCB would be added back to the income of the assessee in the year in which such units are repurchased or redeemed. This would be treated as income of the assessee and taxed accordingly.
2. Repurchase after completion of the lock-in period: If the units are repurchased or redeemed after the completion of the lock-in period of 3 years from the date of investment, the capital gains arising from such repurchase or redemption would be taxed as long-term capital gains. The cost of acquisition of such units would be the amount of investment made by the assessee, and the sale consideration would be the amount received on repurchase or redemption. The tax rate for long-term capital gains on equity-oriented funds is 10% (plus applicable surcharge and cess) without indexation or 20% (plus applicable surcharge and cess) with indexation, whichever is lower.
3. Maturity of the scheme: In the case of ELSS, the units are typically locked in for a period of 3 years. At the end of this period, the units do not mature, but the lock-in period ends. The investor can choose to continue holding the units or redeem them. If the units are redeemed after the completion of the lock-in period, the treatment would be the same as mentioned in point 2 above.

What amount will be treated as cost of acquisition for the purpose of computing the capital gain ?

The cost of acquisition is the actual amount paid for acquiring the asset. It also includes any expenses incurred for acquiring or improving the asset, such as brokerage charges, registration fees, transfer charges, etc. In the case of inherited assets, the cost of acquisition is taken as the cost to the previous owner.

For assets acquired before April 1, 2001, taxpayers have the option of considering the fair market value of the asset as on April 1, 2001, as the cost of acquisition instead of the actual cost. This option is available only if the actual cost and supporting evidence for the same are not available. This fair market value is determined using the cost inflation index notified by the government.

What will be the cost of acquisition in case of conversion of debentures into shares?

In case of conversion of debentures into shares, the cost of acquisition of shares will be the cost of acquisition of the debentures. The period of holding for the shares will be considered from the date of acquisition of the debentures.

For example, if an individual acquired debentures of a company for Rs. 50,000 on 1st January 2019 and the conversion ratio is 1:1, then if the debentures are converted into shares on 1st January 2021, the cost of acquisition of the shares will be Rs. 50,000 and the period of holding will be considered from 1st January 2019.