Grandfathered tax computation in case of merger and aquisitions

Page no : 2

Acche Din (39 Points)
Replied 14 February 2022

Dear Justin - ref your poser, what you mean is you want to sell Bandhan (not Gruh as you mentioned - since Gruh is no longer listed after merger)......the short and clear answer is section 112a shall apply in the sense that you would need to enter the transaction in the Schedule 112a, and then you can deduct Rs 100,000 as deduction since that is allowed. It is perfectly legal.

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Justin Russel Pinto (Mr.) (38 Points)
Replied 15 February 2022

Originally posted by : Acche Din
	Dear Justin - ref your poser, what you mean is you want to sell Bandhan (not Gruh as you mentioned - since Gruh is no longer listed after merger)......the short and clear answer is section 112a shall apply in the sense that you would need to enter the transaction in the Schedule 112a, and then you can deduct Rs 100,000 as deduction since that is allowed. It is perfectly legal.

15-Feb.-2022
Dear Acche Din,
Thank you for your reply. I meant "Bandhan Bank" and not "Gruh".

Silly me!

Thank you for clarifying that Section 112a will apply in the sense that I would need to enter the transaction in Schedule 112a and then deduct Rs. 100,000 as deduction.

Thanks again. This is a nifty and legal way of atleast using the limit of Rs. 1,00,000 available under Section 112a; irrespective of whether one is allowed to avail the benefit of grandfathering.

By the way, does this mean that if I sell Rs. one lakhs-worth (not a penny more) of Bandhan Bank every year and despite the cost of acquisition being deemed to be nil (on account of the confusion after the acquisition of Gruh by Bandhan Bank), the net gain would be Rs. 1,00,000 which is within the Section 112a limit and would therefore be tax-free?

I would appreciate it if you could corroborate my line of reasoning in the matter.

Best regards,

Justin Pinto.

Acche Din (39 Points)
Replied 23 February 2022

Dear Justin

The cost of acquisition will not be NIL. It will be as per the formula of grandfathering which has been delineated and discussed in the thread. There is no use in prolonging the holding period just to be under threshold of Rs 100,000. Decisions on holding period need to be taken keeping the profit potential in mind not LTCG tax tangle - that's my opinion. Let the ambiguity in taxation, if any not cloud the essence of investment goal.

amar kapoor (4 Points)
Replied 15 May 2023

Gruh finance declared bonus @ 1;1in June 2018 after grandfathering date 31:1:18. It has to be taken into account for calculating long term caital gain on sale of Bandhan Bank sares.