Rs 1.9 Trillion IPO Proceeds Under LTCG Tax Scanner
The recent Union Budget has clarified that Long-Term Capital Gains (LTCG) tax is applicable to secondary share sales via IPOs, with retrospective effect from April 1, 2018. This means that promoters and private equity firms who have sold shares through IPOs since then may now face a hefty tax bill.
What is #LTCG tax?
Long-Term Capital Gains Tax (LTCG) is a tax levied on the profits made from the sale of capital assets, such as shares, held for more than one year. The current LTCG tax rate for shares is 10% (without indexation benefits).
How does this affect #IPO proceeds?
Prior to the budget clarification, there was ambiguity around whether LTCG tax applied to secondary share sales through IPOs. This led to many promoters and investors avoiding paying the tax. However, with the retrospective clarification, these individuals may now be liable for LTCG tax on their IPO proceeds.
Impact on future IPOs
The LTCG tax clarification is likely to impact future IPOs in several ways:
What should #promoters and investors do?
Promoters and investors who have sold shares through IPOs since April 1, 2018, should review their tax positions and consult with a tax advisor. They may need to make additional provisions for LTCG tax.
Conclusion
The LTCG tax clarification is a significant development that could have a major impact on the Indian IPO market. It is important for promoters, investors, and companies to be aware of the implications of this change.