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Business News/ Money / Personal Finance/  HDFC twins merger: Income tax implications that HDFC Bank shareholders should know
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HDFC twins merger: Income tax implications that HDFC Bank shareholders should know

HDFC twins merger: Every HDFC shareholder has got 42 shares of HDFC Bank for every 25 shares they hold

HDFC twins merger: Capital gains on the sale of shares are calculated on the basis of the holding period and the date of acquisition of shares. (PTI)Premium
HDFC twins merger: Capital gains on the sale of shares are calculated on the basis of the holding period and the date of acquisition of shares. (PTI)

After the HDFC twins merger, private lender HDFC Bank has allocated over 311 crore new shares of the bank to shareholders of merged entity HDFC Ltd. The share allocation was done as per the swap ratio announced As per the scheme, every HDFC shareholder has got 42 shares of HDFC Bank for every 25 shares they hold.

Income Tax implications for HDFC Ltd shareholders post the merger

Generally, if you receive any capital asset for an "exchange" with another capital asset, the same is treated as a "transfer" and is taxable as capital gains.

According to tax and investment expert Balwant Jain there are no immediate effects 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 "transfer of capital asset" and hence, there are no capital gains," said Balwant Jain.

Capital gains on HDFC Bank shares

Capital gains on the sale of shares are calculated on the basis of the holding period and the date of acquisition of shares. If someone receives shares as part of a merger, the holding period is counted from the date of purchase of the amalgamating company’s shares (HDFC Ltd in this case), said Sambhav Daga, partner at Sunil Johri & Associates.

Period of holding

Now, let’s assume, you want to sell HDFC Bank shares today as now they are listed on the exchanges. This will be subject to long-term capital gains tax (LTCG). In this case, the holding period will be counted of HDFC Ltd, and LTCG will apply, explained Balwant Jain

In the case of listed companies, equity shares held for more than 12 months are classified as long-term capital assets, while those held for a shorter period are classified as short-term capital assets.

If you hold shares in HDFC Ltd, Know the income tax implications due to the merger for you as a shareholder, Sambhav Daga has explained in a series of tweets.

 

HDFC Bank on Monday broke into the exclusive global club of companies with $100 billion market capitalisation with the listing of new shares of HDFC Bank. It is now the world's seventh-largest lender.

HDFC twins merger

Housing finance major HDFC merged with its subsidiary HDFC Bank on July 1. Shares of HDFC Ltd discontinued trading on the stock exchanges on July 13. The bank had set July 12 as the record date for determining eligible shareholders for share allotment.

 

 

 

 

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ABOUT THE AUTHOR
Sangeeta Ojha
A business media enthusiast. Writes on personal finance, business and banking.
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Published: 17 Jul 2023, 12:36 PM IST
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