TCPL Rights Entitlements

Income Tax Income from Capital Gains
1

I received 2 Tata Consumer Products Ltd - Rights Entitlement on 30-07-2024 and sold them on 09-08-2024.

  1. How this income should be reported in ITR-3?
  2. It it is to be shown as STCG, what should betaken as Cost of Acquisition?
2

The income from selling Rights Entitlement (RE) in Tata Consumer Products Ltd. should be reported in Schedule CG of ITR-3 as Short-Term Capital Gains (STCG), as you held the RE for a short duration.

Here’s how to report it:

  1. Nature of Asset: Since the RE was held for a short duration, it qualifies as a short-term capital asset.
  2. Cost of Acquisition (COA):
  • According to Section 55(2)(aa)(iii) of the Income Tax Act, the cost of acquisition of Rights Entitlements is considered Nil when they are received as part of a rights issue.
  • Hence, for the purpose of calculating capital gains, take the COA as Nil.
  1. Capital Gains Calculation:
  • Sales Consideration: The amount you received on selling the 2 REs on 09-08-2024.
  • Cost of Acquisition: Nil (as per the provisions).
  • STCG: Sales Consideration - Cost of Acquisition (Nil) = Entire Sale Amount.
  1. Reporting in ITR-3:
  • In Schedule CG, under the section for Short-Term Capital Gains on sale of assets other than equity shares or units of equity-oriented mutual funds, report:
    • Sales consideration received
    • Cost of acquisition as Nil
    • The net STCG (which will be the entire sale amount)

This gain will be subject to tax at the applicable rates for STCG.

3

Thank you so much for the clear and precise answer.