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Following the merger of the HDFC twins, the private lender HDFC Bank distributed more than 311 crore new bank shares to HDFC shareholders. The shares were distributed in accordance with the declared swap ratio. According to the plan, every shareholder of HDFC receives 42 shares in HDFC Bank for every 25 shares they own.
Income Tax Implications for HDFC Shareholder Ltd Following The Merger
In general, if you acquire any capital asset through an “exchange” with another capital asset, the acquisition is regarded as a “transfer” and is subject to capital gains tax.
According to tax and financial expert Balwant Jain, the merger of the shares has no immediate impact.
According to Balwant Jain, if you obtain shares of the new firm in exchange for shares you previously owned in the old company, the merger is not considered a “transfer of capital assets,” and there are no capital gains as a result.
Gains On Shares of HDFC Bank
The holding duration and the date of purchase of the shares are used to determine capital gains on the sale of the shares. Sambhav Daga, partner at Sunil Johri & Associates, said that if someone obtains shares as part of a merger, the holding period is calculated from the date of acquisition of the shares of the combining firm (in this example, HDFC Ltd.).
Time Frame of Holding
Let’s imagine that since HDFC Bank shares are now available on exchanges, you wish to sell them today. Long-term capital gains tax (LTCG) will apply to this. According to Balwant Jain, HDFC Ltd.’s holding term will be taken into account in this situation, and LTCG will be applicable.
Equity shares held by listed firms for longer than a year are categorized as long-term capital assets, while equity shares held for less time are categorized as short-term capital assets.
Sambhav Daga has outlined the income tax ramifications of the merger for you as a shareholder in a series of tweets if you own shares in HDFC Ltd.
With the launching of fresh shares of HDFC Bank on Monday, the bank joined a select group of corporations with a market value of $100 billion. It is currently the seventh-largest lender in the world.
Merging of The HDFC Twins
On July 1, housing financing giant HDFC and HDFC Bank amalgamated. On July 13, trading in shares of HDFC Ltd. was suspended on stock markets. In order to determine whether HDFC shareholders are qualified for share issuance, the bank chose July 12 as the record date.
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