HDFC twins merger: Tax implications that HDFC Bank shareholders ought to know

After the HDFC twins merger, personal lender HDFC Bank has allotted over 311 crore new shares of the financial institution to shareholders of merged entity HDFC Ltd. The share allocation was executed as per the swap ratio introduced As per the scheme, each HDFC shareholder has acquired 42 shares of HDFC Bank for each 25 shares they maintain.

Income Tax implications for HDFC Ltd shareholders publish the merger

Generally, in case you obtain any capital asset for an “exchange” with one other capital asset, the identical is handled as a “transfer” and is taxable as capital beneficial properties.

According to tax and funding skilled Balwant Jain there are not any speedy results on the merger of the shares

“In a case of a merger, if you receive shares of the new company in place of shares that you already had in the old company, it is not treated as a “switch of capital asset” and hence, there are no capital gains,” stated Balwant Jain.

Capital beneficial properties on HDFC Bank shares

Capital beneficial properties on the sale of shares are calculated on the idea of the holding interval and the date of acquisition of shares. If somebody receives shares as a part of a merger, the holding interval is counted from the date of buy of the amalgamating firm’s shares (HDFC Ltd on this case), stated Sambhav Daga, associate at Sunil Johri & Associates.

Period of holding

Now, let’s assume, you wish to promote HDFC Bank shares right now as now they’re listed on the exchanges. This will likely be topic to long-term capital beneficial properties tax (LTCG). In this case, the holding interval will likely be counted of HDFC Ltd, and LTCG will apply, defined Balwant Jain

In the case of listed firms, fairness shares held for greater than 12 months are categorised as long-term capital belongings, whereas these held for a shorter interval are categorised as short-term capital belongings.

If you maintain shares in HDFC Ltd, Know the revenue tax implications as a result of merger for you as a shareholder, Sambhav Daga has defined in a sequence of tweets.

HDFC Bank on Monday broke into the unique international membership of firms with $100 billion market capitalisation with the itemizing of latest shares of HDFC Bank. It is now the world’s seventh-largest lender.

HDFC twins merger

Housing finance main HDFC merged with its subsidiary HDFC Bank on July 1. Shares of HDFC Ltd discontinued buying and selling on the inventory exchanges on July 13. The financial institution had set July 12 because the file date for figuring out eligible shareholders for share allotment.

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Updated: 18 Jul 2023, 07:35 AM IST