OUR expert Kartik Jhaveri tells you how to arrive at a fair price for your old shares. In reply to a question asked by a reader, Jhaveri tells you what to do with your old shares.

Question:
We have been investing in shares for a long time. During this time, many companies have dissolved and we own dud shares. We have been unable to preserve all purchase records as many shares are inherited and bills have been misplaced by passage of time.

However, we feel the total valuation of investment in shares is grossly undervalued in our balance sheet filed with the Income Tax Return. Can we revise this upwards? Also we need to ensure that we do not have any tax liability? Are these options worth considering?

Answer: The first issue to be determined is whether all the shares you hold are in demat form? I am assuming that all of them are in demat form. The next crucial and important thing is to decide whether selling could be considered an option for you or not? Selling may be the easiest way out – given that all shares you hold are long-term and there would be no capital gains on sale of such shares. Hence, for the ones that have value it might be a good idea to clean up and get the house in order.

However, remember that cost of brokerage, Securities Transaction Tax (STT), etc will have to borne on the sale proceeds. Cost of brokerage / entry loads may have to be borne on reinvestment of the same as well.

If you have dud shares, you cannot do much. Consult your trusted broker or a Chartered Financial Analyst or a Financial Planner who could advice you so that good shares with a potential to appreciate may not get sold accidentally. This is, if you choose to sell the shares.

Also read: How to find a jewel of an investment

How to arrive at value of old shares?
There is something called a "fair value" of shares. This value is used in case of shares acquired/purchased many years back, where bills for purchase may be missing.

This fair value is part of information published by the stock exchange. Your broker can help you with this too. You could use this information to correct your valuation. However, given that these shares are very old purchases, all of them would qualify for the benefit of long-term capital gain tax which is zero.

So, there is no reason to believe there could be an impending inquiry from income tax authorities if and when you realise the sale proceeds. An inquiry would normally be raised if there is a suspicion of tax evasion or some other anomaly. If and when you sell shares the entire proceeds will be tax-free.

Read: Investing too much in PPF and LIC? Revisit your strategy

Illustration: Vaibhav Shirke

Disclaimer: The contents above are the intellectual property and copyright of the author, Kartik Jhaveri. No part may be used or reproduced in any form or manner. If you choose to act upon the information contained in the above article it is at your own risk. This article is purely educative and you are strongly advised to consult an expert prior to taking any significant decision.

e-mail: Kartik Jhaveri

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