Normally, the nominees are accepted in sequence. The society would transfer the flat in the name of the second nominee if the first one was not alive when your mother expired. The nominee does not automatically become an owner of any of the assets transferred in his name. Nomination is a process of convenience. He is a trustee of the assets and is expected to hand over the assets to the trustees of the assets of the deceased person who would distribute the assets as indicated in the will of the deceased person.

Since your mother has died intestate, it would be necessary for you to obtain a probate from a court of law which will indicate how the assets are to be distributed and this will depend upon the Succession Act, depending upon your religion. This is a long-drawn out process.

Nevertheless, the nominee can sell the flat after it gets transferred in his name. There is no stamp duty payable for getting the flat transferred in the name of the nominee because this is a case of transmission and not transfer.

However, the nominee cannot use the funds for any purpose other than paying the tax, if any. Since your father had gifted the flat to your mother, its date of acquisition is the original date on which your father purchased it. To arrive at the tax on capital gains, it is necessary to get the `fair market value' (FMV) as on April 1, 1981, of the flat from a chartered valuer, recognised as such by the authorities.

However, to assist you in arriving at the figure, let me assume that the FMV was Rs 2 lakh. This amount is to be multiplied by the `cost inflation index' during the year of the sale which is 389 and that during the year of purchase. If the purchase happens to be prior to April 1, 1981, you can use the FMV as on April 1, 1981, and the index for the financial year 1981-82, which was 100. This brings the indexed cost to Rs 7.78 lakh. Then again, you have spent Rs 50,000 towards repairs, renovations and improvement. Since the required period of three years has not expired, this is a short-term asset. The total short-term and long-term cost is Rs 8.28 lakh. Your sale price is only Rs 8 lakh. There is no tax payable. Moreover, the book loss of Rs 28,000 can be carried forward for set-off against any capital gains, short or long-term, incurred in future. You can file the returns as `estate of a deceased person', which has a separate identity for tax purposes.

My opinion is that small investors should not go in for demat for one single reason. It is a practice with the companies to issue shares in marketable lots resulting in the investor having huge number of certificates in physical format. Moreover, over the years, one comes into possessing odd lots by virtue of subscribing to rights and bonuses. Therefore, the cost of converting into demat is astronomically high. Take my instance of a single scrip. I hold 95 shares (face value Rs 100) of Alembic Glass. The DP charges are Rs 50 per certificate, minimum charge being Rs 750. Moreover, I will have to pay Rs 1,950 a year against no charges for physical condition. Since the Securities and Exchange Board of India (Sebi) has allowed to trade in physical format of 500 shares or Rs 25,000, whichever is less, I feel that it is advantageous for one and all to hold their scrips in physical format. Your opinion please.
--R N Shenoy, Mumbai

The amount that investors suffered on account of frauds, thefts, bad deliveries and destruction through natural calamities, of their physical certificates is much costlier, monetarily and otherwise, than what they pay for demat. Either you have your figures wrong or your DP is taking you for a ride. Rs 50 per certificate is ludicrous, not to mention the minimum charge of Rs 750 and Rs 1,950. Kindly let me know the name of the DP which is charging so much.

Compare the charges with those of Stock Holding Corporation of India (SHCIL), a leading DP, which knows how to go about its business. SHCIL has different tariff plans for customers with different profiles. Let's take a look at what tariff a small investor like you and me will pay to SHCIL.The charges for dematerialisation are Rs 3 per certificate. Per request, the investor has to pay Rs 25 and any number of certificates may be attached per request. There are no custody charges up to a value of Rs 5 lakh. To cap it all, there are no minimum charges to be borne unlike Rs 750 mentioned by your DP. Finally, no one is forcing you to demat your shares.

The current situation is that most brokers discourage trading in physical form. Irrespective of the quantity of shares involved, in the physical form, you will find that the selling price is almost in all cases at a discount of 10 per cent or so.