Do we need to pay deemed dividend tax as per the tax slab for the dividend cash we have not received due to cancellation of tata motors DVR stocks?

[SG_13]

You can check out this article for better understanding.

Why did I receive fewer Tata Motors shares than expected after the merger?

@Sasi

Do we need to pay deemed dividend tax as per the tax slab for the dividend cash we have not received (Rs 200.63 * No. of AOS) due to cancellation of tata motors DVR stocks?

Yes.

(Deemed dividend per share * No.of DVR shares previously held)

@Sasi

Do we need to pay capital gain tax if we prefer to hold the newly issued tata motors shared

Yes,

Capital gains will be = { (1111.35 * no of ordinary shares issued) - Cost of acquisition of old DVR shares - Deemed divided }

PS:
You can also check out this example

@SG_13

Your gains from this conversion can be broken into two parts:

1. Partly as Deemed divided (tax at slab rates)
2. Partly as Capital Gains (special rates)

I will take the closing price (~ ₹1,122) of Tata Motors as on 29th Aug for explaining the below calculations.

Assuming i bought 100 DVR shares at ₹300, my cost of acquisition is ₹30,000.

Now, the price as on 29th Aug will be used to determine the sale consideration.

Since the ratio is 7:10, I will get 70 ordinary shares for the 100 DVR shares.

Assuming ₹1,122 is used for the final calculation, the Sale consideration will be = (₹1,122 x 70) = ₹78,540

Normally, we will take the (Sale price - Purchase price ) to calculate the capital gains.

This would be (₹78,540 - ₹30,000) = ₹48,540

But here, since the deemed divided concept is involved, the total gains will be broken into two.

The actual deemed divided will be known only later, for now i will consider the ₹200 per share as the deemed divided portion.

So the deemed dividend for 100 DVR shares will be (100 x ₹200) = ₹20,000

In our income tax return, we will show ₹20,000 as Deemed dividend under IFOS, and the remaining ₹28,540 as capital gains.