Tax on shares of Tata Metaliks Ltd after amalgamation

Taxation
1

Hi
The shares of Tata Metaliks Ltd undergo scheme of amalgamation with Tata steel. I had 15 shares of Tata Metaliks currently. So, I will get 79 shares of Tata Steel for 10 Shares of tata metaliks. Should I need to pay any tax for this one. Could you please let me know how the process will take place.

Also, I got an email from Zerodha that any fractional shares will be settled by the company through cash. Should I need to pay tax for this.

Note: I was already sitting on profit in Tata Metaliks.

Thanks

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Hi @srihari_raman

As per my understanding of tax laws:

Share swapping on account of merger is taxation neutral event for investors.

There won’t be any change to your initial holding period. So LTCG or STCG will be determined accordingly whenever you decide to sell them.

Whereas, any cash that you receive as a part of settlement of fractional shares will be taxed again as per the holding period

@Quicko can you please confirm?

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Thanks for the reply @Meher_Smaran.

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Hey @srihari_raman,

IT law does not consider the swap of shares as a transfer, ensuring that it is tax-neutral for shareholders.

Thus, there will be no tax payable on the 10 shares you exchange. Capital Gains will apply on the remaining 5 shares based on the holding period and the amount of cash you receive against each share.

Later, when you sell shares of Tata Steel, you can deduct the cost of acquiring shares of Tata Metaliks Ltd against the sales price to compute the capital gains.

Hope this helps!

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Thank you.

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