Answer: No, the full value of the sale proceeds will not be taxed, as your capital gains are in your hands. Even though your cost of acquisition for inherited shares is nil, you will still get a deduction for your deemed cost of acquisition. For the computation of capital gains, the deemed cost of acquisition for the seller in the case of assets received as a gift or inheritance is the cost of the previous owner, who had actually paid for it. I presume that the shares in your demat account are listed equity shares. As your total holding period and that of the previous owner who paid for it exceeds one year, the profits on the sale of such shares would be considered as long-term capital gains. If you sell the shares through a stockbroker on the platform of an Indian stock exchange where securities transaction tax (STT) is paid, the profits will be taxed at a flat rate of 10 per cent without indexation after the first Rs 1 lakh of long-term capital gains on which no tax is payable. The limit of Rs 1 lakh is to be computed for long-term capital gains on the sale of all listed shares and equity-oriented schemes taken together.
For assets acquired prior to April 1, 2001, the fair market value as on April 1, 2001 can be taken as the cost of acquisition for the purpose of computing long-term capital gains. In the case of listed shares acquired before January 31, 2018 and on which STT has been paid, you get the benefit of grandfathering, under which the market price of the shares on January 31, 2018 is to be taken as the cost of acquisition if it is higher than your deemed cost of acquisition.