I had 700 shares of Allahabad Bank purchased at an average price of ₹104 during 2013. On merger of the Bank with Indian Bank in 2020, I was allotted 80 shares of Indian Bank. If I wish to sell these shares now, what is the cost of shares that I have to take for computation of capital gain or loss?
NR Pai
The original cost of acquisition of shares of Allahabad Bank, which was acquired by you during 2013 was ₹72,800 (700 shares* ₹104 per share). Later, in 2020, Allahabad Bank got merged with Indian Bank and you have been allotted 80 shares of Indian Bank in place of original 700 shares of Allahabad Bank.
Section 49(2) of Income Tax Act, 1961 (the Act), deals with the cost of acquisition (COA) for shares received in an amalgamated Indian company. As per this section, the COA of new shares shall be deemed to be the COA to him of the shares in the amalgamating company (old company). Based on above provision, the total cost of new shares shall be ₹72,800 and per share value be proportionate to the number of shares received.
So, the cost per Indian Bank share = ₹72,800/80 shares = ₹910 per share
Hence, ₹910 will be your COA per Indian Bank share. If you sell the Indian bank shares, then capital gain will be calculated as follows:
Capital gain/loss per share = Sale price per share – ₹910.
Further, the nature of capital gain shall be Long term capital gain (LTCG) as the period of holding shall be calculated from 2013, and not from the date of merger.
The author is a practising chartered accountant
Published on December 20, 2025
