Convertible preference shares entitle a holder fixed number of shares after a time. This is the point of time when the taxation issue starts rising. So this post is going to discuss and provide answers to following questions :
- Whether the conversion of preference shares to shares gives rise to capital gains?
- How to compute period of holding of shares received on conversion of preference shares?
- How are the cost of acquisition of shares on redemption of preference shares determined?
- From which date indexation benefit allowed -from date of redemption or from date of original holding of preference shares?
- Whether special tax rate u/s 112A applies to long term capital gains on the sale of shares received on conversion of preference shares?