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No capital gains tax for IPOs, bonus issues

The government on Tuesday exempted genuine equity investments through IPOs, bonus or rights issues.

Published: 07th June 2017 04:19 AM  |   Last Updated: 07th June 2017 04:22 AM   |  A+A-

By Express News Service

NEW DELHI: The government on Tuesday exempted genuine equity investments through IPOs, bonus or rights issues by a listed company from long-term capital gains tax even if no securities transaction tax (STT) was paid on the transfers, Finance Ministry said in a statement.

It has also exempted holding-subsidiary transactions or transactions involving mergers/demergers, equity investments made by a non-resident under FDI regulations, employee stock options or gifts in the form of shares from long term capital gains tax.

“This notification comes as a breather for foreign investors and venture capital houses as well as shareholders who have acquired shares upon corporate restructuring undertaken vide court approved schemes on which no STT was paid. It clearly intends to allow genuine transactions the benefit arising from section 10(38) without making any exceptions,” said Abhishek Goenka, Partner and Leader Direct Tax, PwC. He pointed out that the government has provided a final list of transactions on which long term capital gains tax shall be exempted despite STT not been paid at the time of acquisition.

The three specified transactions where the provision will apply are — where an acquisition of a listed equity share, which is not frequently traded in a recognised stock exchange, takes place through preferential issue.  Those acquisitions where the listed scrip is not purchased over a recognised stock exchange. And acquisition during the delisting period of the company.

“The government has specifically excluded ESOPs from being taxed although no STT may have been paid at the time of acquisition,” pointed out Goenka.

This notification is applicable from April 1, 2018.


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