Capital gain tax on sale of Zomato IPO shares

 

Capital gain tax on sale of Zomato IPO shares or any  IPO allotment:

 

Do you bid for IPO allotment and  after allottment do you sale shares on listing day ( or subsequent days) to reap listing gain ??

Such profit or gain reaped on listing day (or any day sold before 12 months) is termed as Short Term Capital Gain (STCG) and will be taxed @15% on full gain (irrespective of your Tax slab )

Let us take real life example , Bid price of Zomato was Rs. 76 per share and on listing day (or any day before 12 months)  you sold it for Rs. 125 per share. Your Profit is Rs. 49 Per share . suppose you incurred Re 1 as transaction charge in sale so your net profit is Rs. 48 Per share . Lot size of Zomato was 195 and you were allotted 1 lot only . If you sold full 1 lot your net profit is Rs. 48*195=Rs. 9360 . So your Tax liability will be Rs. 9360*.15%=Rs 1404 plus 4% cess. (irrespective of your Tax slab )    

Now Let us understand what is Capital Gain (on share, MF ) in detail :

 

There can be two types of gain’s: (i) long term or (ii) short term.

Since the shares are going to be listed on stock exchange hence, if the shareholder sell such shares on the recognised stock exchange, such shares will be considered as long term asset if they are held for more than one year and will be considered as short term if they are held for a period less than 1 year.

The taxability of such shares will be calculated based on section “111A for short term gain” and “112A for long term gain” wherein tax rate of short term gain is 15% of the gain and for long term gain the tax rate is 10% of the gain amount.

Looking at the current scenario we know that many people sell their shares on the listing day itself to earn the listing premium and hence the gain earned by such transaction will be considered as short term capital gain as the assessee held shares for less than one year period and hence he/ she shall be liable to pay tax at the rate of 15% on such gain under section 111A of the Income tax Act.

 

However if the shareholder holds the share for more than one year from the date of listing as the specialty chemical sector is likely to see boom in next year then he or she shall be liable to pay tax at the rate of 10% on the gain amount under section 112A of the Income tax Act.

Further, for long term capital gain no tax needs to be paid on the initial Rs. 1 lakh gain u/s 112A of the Income tax Act and no benefit of indexation will be available in case of long term gain since the shares are listed and sold on recognized stock exchange.

 

In case of long term capital gain one can claim exemption u/s 54F by investing the entire sale consideration in a new residential house and if the conditions mentioned under section 54F are fulfilled, other than section 54F there are no other way to save capital gain tax.

 

Also, the tax rates mentioned above are just base rates and surcharge and cess will also be added (currently 4%)accordingly on such tax rates.

 

Please Note that above rule is for Shares and MF  listed in Stock Exchanges only

For sale of Land, House , Jewellery . unlisted share long term Capital gain is only if you hold them for more than 24/36 months and benefit of Indexation will be available.

 

For further query please Whatsapp me @9470307730