What are Right Shares

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Right shares are shares which an existing shareholder is able to purchase at a price which is normally less than the market price.

The shareholder has two options

     (a) He can either purchase the shares by paying the price

     (b) He can sell the right entitlement (renounce the right in  favour of someone else)


When  are Right Shares Taxable ?

It is taxable when right shares are actually sold

 

What is Cost of Acquisiton

Type of share

Treatment

Original Shares held

Cost remains the same

Right shares (actually acquired)

Amount paid for purchases for the share is COA

Right shares (entitlement sold)

COA is nil

 

Treatment for Person purchasing the Right Entitlement 

COA =

Amount paid for acquiring entitlement

   +

Amount paid for purchasing the shares. 

  1. Income Tax
  2. Income from Capital Gains
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Davneet Singh
Davneet Singh is a graduate from Indian Institute of Technology, Kanpur. He has been teaching from the past 7 years. He provides courses for Mathematics and Science from Class 6 to 12. You can learn personally from here https://www.teachoo.com/premium/maths-and-science-classes/.
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