• Regarding US equity share disclosure in schedule FA - table A3

I am a resident Indian working in a MNC. As part of the ESPP plan provided by my company i have bought shares of my company (which are listed in US) since August- 2018

i have bought around -
1. Rs.57000 worth of shares in Aug-2018 &
2. Rs.65000 worth shares in Aug-2019
3. Sold Rs.20000 in Dec-2019

I had already disclosed 1st purchase in ITR AY2019-20

Now my query is --
1. should I mention both the transactions 1 and 2 as two rows in table A3 of schedule FA in current AY2020-21?
or just the 2nd one which was during the finance year 2019-2020?
2. My 3rd transaction (i.e. sale) will go in both column 11 and 12, or just column 12?
3. the STCG incurred for my sale will be filled in A5 a(i) or A5 a(ii) in schedule CG?
4. if it is in A5 a(i), how to calculate 
 "Fair market value of unquoted shares determined in the prescribed manner" ?
 and how is it different from
 "Full value of consideration received/receivable in respect of unquoted shares"
Asked 19 days ago in Income Tax

Query 1

You should mention both. Please read the instructions for table A3 of Schedule FA, copies and pasted here for your ready reference:

"A3
Details of Foreign Equity and Debt Interest held (including any beneficial interest) in any entity at any time during the relevant accounting period."

It seems you are holding the shares purchased in August 2018 during the FY 2019-20.  Hence, you need to report both. 

Mention separately in each row for each holding. 

 

Query 2

Column 11 is for closing balance and Column 12 for the total amount paid with respect to the holding. Column 11 is cumulative net of sales and column 12 is for acquisitions during the period.

Query 3

A5 a(i) of Schedule CG is for shares other than quoted shares and A5a(ii) is for securities other than unquoted shares. In your case, it should be in A5 a(i)

Query 4

The capital gains on sale of unquoted shares is u/s 56(2) and under Rule 11A of Income Tax Rules. If the sale consideration is less than the fair value of shares as computed under Rule 11A, then the fair value will be considered for the purpose of computation of capital gains. 

I use standard software to fill in the details and the return is filled up automatically. I suggest that you may use standard software to file your return, though you can still use the software downloaded from the Income Tax Department. 

I suggest that you should take professional help while determining capital gains on the sale of your shares. 

B Vijaya Kumar
CA, Hyderabad
921 Answers
83 Consultations

5.0 on 5.0

1. You can club both the holdings and show in one row as you need to show the holdings and not transaction.

 

2. It will go into sales proceeds column.

 

I need to check the form and exact serial numbers.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1.You need to show total holdings.

 

2.It will go into sales proceeds column.

 

3.It should be mention in A5 a(i)

 

4.When an owner of Unquoted share ("Shares") in a Company transfers the shares to any person, he is required to pay Capital Gain tax on the difference between the sale consideration received by him and the cost of acquisition of such shares (or the inflation indexed cost, wherever applicable).

 

It is important to check if the "Sale consideration" that he receives from the buyer is at least equal to or more than the "Fair Market Value" ("FMV") as defined under Rule 11UA of The Income Tax Rules, of the shares sought to be transferred.

 

As defined under Rule 11UA, the fair market value of unquoted equity shares shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under (a) or (b), at the option of the assessee, namely; -

 

Option (a):

 

The fair market value of unquoted equity shares shall be calculated simply by ascertaining "Book value of Assets (Less) Book value of Liabilities."

    • For ascertaining the book value of assets, following amounts shall be excluded:

       

       

        • Advance Tax, Tax deduction or collection at source or any amount of tax paid as reduced by refund claimed under the Income Tax Act.

       

       

        • any unamortized amount of deferred expenditure which does not represent the value of any asset.

       

       

 

 

    • For ascertaining the book value of liabilities, following amounts shall be excluded:

       

       

        • the paid-up capital in respect of equity shares;

       

       

        • the amount set apart for payment of dividends on preference or equity shares

       

       

        • reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation;

       

       

        • any amount representing provision for taxation, other than amount of tax paid as reduced by the amount of tax claimed as refund

       

       

        • any amount representing provisions made for meeting liabilities, other than ascertained liabilities;

       

       

        • any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference share.

Option B:

The fair market value of the unquoted equity shares as determined by a Merchant B anker as per Discounted Free Cash Flow Method. Earlier, a Chartered Accountant was also permitted to determine the FMV of such equity shares. However, with effect from 24th May 2018, this right of Chartered Accountant is taken away and therefore only Merchant Banker is authorised to determine the FMV of such equity shares.

 

If the transaction of transfer of shares takes place at a price which is less than the FMV, there is a tax impact both on buyer of the shares as well as the seller. The legislation has made an attempt to In order to ensure the full consideration is not understated in case of transfer of unlisted shares, section 50CA

 

We may assist you in entire procedure.

 

It is advisable to take a phone consultation for detailed discussion.

Payal Chhajed
CA, Mumbai
5010 Answers
120 Consultations

5.0 on 5.0

- For foreign income and taxes paid outside India, three schedules are applicable i.e. Schedule FSI, TR and FA. Filing of Form 67 is mandatory before filing of ITR. Include foreign equity in Schedule AL if applicable.

 

5. You have to disclose the income, taxes paid and holdings as per India F.Y.

 

6 & 7. Yes in A.Y. 2020-21

 

For detailed discussion, please call.

 

 

 

Vivek Kumar Arora
CA, Delhi
3936 Answers
294 Consultations

5.0 on 5.0

Hi,

 

Purely from the disclosure perspective in schedule FA, you need to consider the calendar your followed in USA.

 

However, capital gain and dividend received in March 20 and February 20 respectively would be taxable in assessment year 20-21.

Lakshita Bhandari
CA, Mumbai
5367 Answers
440 Consultations

5.0 on 5.0

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