Cost of gifted unquoted shares is equal to what the owner paid while buying

What is the cost of acquisition for unquoted shares received as gift? Will it be the purchase value of the donor or the fair market value of shares on the day the gift is made? To calculate long-term capital gains (LTCG), which year should be considered—the year when the donor acquired the shares or the year in which they were gifted? To save the tax liability arising from LTCG from the sale of unquoted shares, should the amount of gain or total consideration be invested in a residential flat or Section 54EC bonds? Please give the answer with relevant Sections of the Income-tax Act, 1961.

—Arvind Goyal

We have assumed that the unquoted shares were gifted to you by a relative as defined under the Income-tax Act, 1961. Further, we have assumed that the donor acquired the shares post 1 April 2001.

For the purpose of calculating capital

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