INSUBCONTINENT EXCLUSIVE:
3 min read Last Updated : Jul 26 2024 | 11:52 PM IST
Secondary share sales worth Rs 1.9 trillion mobilised via initial public offerings
(IPOs) since April 2018 could now be assessed for potential evasion of long-term capital gains (LTCG) tax.
Due to ambiguity over the
However, the latest Budget not only clarifies the applicability of LTCG but also states that this will be enforced retrospectively from
April 1, 2018.
Almost two-thirds of the Rs 3 trillion raised through IPOs since FY19 has been secondary or offer-for-sale (OFS)
This figure also encompasses proceeds from the IPOs of public sector undertakings (PSUs)
Union Budget presented in 2018, the government had instituted a 10 per cent LTCG tax on equity assets sold after a minimum holding period of
For IPOs, since the sale of shares does not occur on the exchange platform, STT is not paid
Furthermore, ambiguity prevailed over the LTCG taxable amount due to the absence of a fair market value (FMV) framework for unlisted
companies.
The latest Finance Bill, by amending Section 55 of the Income-tax Act, has cleared the air over this issue, providing a
framework for FMV to determine the cost of acquisition
M-A Tax - Regulatory Services, BDO India, emphasising that the tax confusion stemmed not from an interpretational loophole but from a
Supreme Court judgments to justify their claims.
The government has yet to estimate the amount of tax that will be recovered, but experts
believe tax officials may scrutinise all IPO mobilisations since FY19
As a result, there may arise instances of reassessment for taxpayers who previously adopted a stance of nil capital gains on the transfer of
The clarification comes at a time when over Rs 1 trillion is anticipated to be raised via IPOs in the next 12 months
Published: Jul 26 2024 | 7:26 PMIST
