Abhishek Securities

Listed companies in Indian stock exchanges accounted for less than a third of the total corporate tax paid to the government in FY18, as reported by Business Standard (BS). This year too represents a continuation of the downward trend in the metric over the last few years. Listed companies are those whose shares are traded on an official stock exchange like BSE (Bombay Stock Exchange). These companies are expected to adhere to specific listing requirements like the number of shares that will be listed be on exchanges and also minimum income levels. According to the I-T (Income Tax) Department, the total tax receipts increased by 17.8 per cent on a Y-O-Y (Year-On-Year) basis, rising to Rs 5.71 trillion in FY18. However, listed companies contributed only Rs 1.88 trillion of the total amount and data shows that the tax paid by India’s top 868 companies declined by 0.6 per cent over the last year. While MSMEs (Medium Small and Micro Enterprises) in India, with revenues of less than ...

SEBI-appointed panel also suggests allowing overseas firms to list in India A committee appointed by the Securities and Exchange Board of India (SEBI) has recommended allowing unlisted Indian companies to directly list their shares on overseas exchanges in at least 10 countries. It also suggested allowing unlisted companies from such countries to list their shares on Indian bourses. While this is a major shift from the current regulatory regime that does not allow unlisted Indian companies to have a direct overseas equity listing, it would require changes in regulations that are outside the purview of the capital market watchdog. “Listing may be allowed only on specified stock exchanges in permissible jurisdictions,” the report stated, adding that such listing can benefit companies in the form of alternate source of capital, broader investor base, better valuation along with other strategic benefits. While allowing overseas companies to list in India, the committee is of the v...

DEMATERIALIZING UNLISTED SHARES: HOW CHANGES AFFECT SHAREHOLDERS Listed companies in India had moved from paper share certificates to the electronic-form, i.e. dematerialized shares way back in the year 1996. However, there was no such mandate in case of unlisted companies leading to instances of fraudulent share transfers and other disputes which resulted in unwanted litigation and hardship for the actual shareholders. To bring in further transparency, improve the know your customer (KYC) framework and overall investor protection, the Indian government has recently made it mandatory for all unlisted public companies to dematerialize their securities. It is pertinent to note that private companies are still exempt from getting their shares dematerialized. This article focuses on the impact and way forward for the shareholders of Indian unlisted public companies in light of this recent development. A public company means a company, other than a private company, formed under th...

Individual wealth in India grew by over 14 percent to reach Rs 392 lakh crore in FY18. This was achieved by a huge 17.42 percent wealth growth in financial assets and 9.24 percent growth in physical assets. Indians' individual wealth grew 14% in FY18 boosted by financial assets:  Investing in unlisted equity has increased Unlisted equity grew by 36.83 percent in FY18, this has been one of the favourite asset classes amongst HNIs. These shares are not listed on any stock exchange and not as liquid as shares listed on stock exchange. These shares are generally privately placed between the buyers and sellers and traded in the over the counter (OTC) markets. Sandip Ginodia , Director   A LTIUS INVESTECH PVT LTD | ABHISHEK SECURITIES We deal in over 60 unlisted companies with 15 years of experience . For latest prices visit :  www.abhisheksecurities.com/unlisted.htm  / call : 09830271248 . Email :  ginodiasandip1@gmail....

I have received shares under the employee stock option plan (ESOP) from my employer. Can you please explain the tax liability on selling these shares? —Kishore Shah There are two stages of taxation for shares allotted to employees under ESOP. The first point is when the shares are allotted by the employer company. The same is taxed as salary or perquisite in the hands of the employee. The second is when the employee sells the shares allotted to her under ESOP. At this stage, the gains are taxed as capital gains. In the first stage, the difference between the shares’ fair market value (FMV) on the date of exercise and the exercise price paid by the employee, if any, is taxable as perquisite or salary on the date of allotment of shares. Accordingly, the employer would compute and deduct the tax on perquisite or salary resulting from allotment of shares to you under ESOP. The income and the perquisite tax deducted by the company thereon would be reflected in your Form 16. Furt...

In a fresh boost to startups, the government on Thursday inserted an amendment to the Finance Bill to provide for capital gains tax exemption if shares of an unlisted company were held for more than two years. Currently, there is no capital gains tax on share transactions in listed companies if those stocks are held for 12 months. But shares of unlisted entities face capital gains tax of 20% even after three years. The tax treatment has been a major area of concern for international investors, several of whom are pumping billions into Indian companies. And, the move is expected to spur M&As. The amendment was introduced as finance minister Arun Jaitley introduced other ones to the Bill, which was later cleared by the Lok Sabha. Most of the other amendments were in the nature of clarifications. For instance, buyers will have to pay 1% tax on cars which cost over Rs 10 lakh, which will be collected by the seller. This, officials said, was a clarification, although the move is mea...

Long-term capital gains on sale of listed shares has now been exempt from tax for more than 10 years, since it was implemented in October 2004. The exemption applies in cases where the Securities Transaction Tax (STT) has been paid, and therefore effectively applies to all transactions of sale of listed shares on a recognised stock exchange. In recent years, the scope of the exemption has been effectively extended to a couple of more types of transactions, not by amending the provision governing the exemption, but by bringing the transactions within the net of STT. One such type of transaction is the public offer for sale of shares. A public offer could be of two types (or a combination of these two)—one, an offer where the company issues shares to the public by allotting new shares, and second, an offer made by the existing shareholders of the company (which may be promoters, venture capital funds, private equity funds, or others) to the public of existing shares held by them in ...

At present, listed shares enjoy concessional tax treatment both in terms of holding period and the tax rate, while they, unlike other asset classes, are subjected to the STT. The tax on capital gains on equity shares held in a company listed on a recognised stock exchange and equity-oriented mutual funds is zero if the stock is held for more than 12 months, while gains made in a shorter period would attract 15% tax. However, in the case of unlisted shares, the tax rate is 20% (with indexation) if held for more than 36 months (considered as long-term) and 30% for domestic companies and 40% for foreign companies for holdings less than three years. “The need of the hour is encourage investments into companies (whether listed or unlisted) to meet the capital needs of the aspirational programmes of the government. A contrarian approach would be to bring in parity between listed and unlisted companies and reduce the (long-term period) for unlisted companies from 36 to 12 months, at...

Industry trackers say that the issue arose after representations were made that investment in unlisted companies be treated on a par with those in listed space. By that the contention was that there would be no tax on  investments  in unlisted companies if the investment is held for a year. "The industry wants the government to clarify the law for unlisted shares and explicitly reduce the holding period for unlisted shares from 3 years to 1 year," said Rajesh H Gandhi, partner, tax,  Deloitte  Haskins & Sells."Given that market participants are acutely sensitive to tax policy changes, any review of the policy should be calibrated, backed by a broader medium to longterm policy objective and should follow extensive stakeholder consultation," said Sameer Gupta, partner and leader,  financial services , tax and regulatory. Currently India has a double  taxation  avoidance treaty (DTAA) with Mauritius and Singapore, which effectively means investor...

The government has drawn up a list of 25 state-owned companies that could sell shares to the public for the first time, possibly raising more than a third of India's record divestment target for the fiscal year. They include profit-making arms of Coal India and ONGC that could help the government get around Rs 25,000 crore in total. Such a move could fire up the primary market besides giving government finances a big boost. The department of disinvestment has written to the administrative ministries. "The idea is to create a pipeline for the next two-three years," the official said. This needs to be done as the government is close to the 51 per cent stake level in several listed stateowned companies, the person said. "So, the ideal situation is that we have approvals for stake sale in these firms and we can proceed depending on market conditions." The unlisted firms may include ONGC Videsh, Southern Coalfields, Bharat Broadband, KIOCL and Mazagon Dock...