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Can I claim exemption or pay less capital gains tax on HDFC stock?

Samraat Jadhav |2276 Answers |Ask -Follow

Stock Market Expert - Answered on Feb 05, 2025

Samraat Jadhav is the founder of Prosperity Wealth Adviser.
He is a SEBI-registered investment and research analyst and has over 18 years of experience in managing high-end portfolios.
A management graduate from XLRI-Jamshedpur, Jadhav specialises in portfolio management, investment banking, financial planning, derivatives, equities and capital markets.... more

Asked by Anonymous - Sep 14, 2024Hindi

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I got HDFC BANK shares on rights basis in 1995 as i was having HDFC LTD shares. Twice stock split took place in 2011& 2019. Now HDFC LTD & HDFC BANK merged. Now if i sell how much tax i have to pay? Please guide.

Ans: I understand that navigating tax implications can be tricky. Since you acquired HDFC Bank shares on a rights basis in 1995 and have experienced stock splits in 2011 and 2019, the merger with HDFC Ltd adds another layer of complexity.

To determine the tax you'll need to pay upon selling your shares, you'll need to consider the following:

Cost Basis: Calculate the original cost basis of your shares, including any additional shares received from the stock splits.

Current Market Value: Determine the current market value of your shares at the time of sale.

Capital Gains: Subtract the cost basis from the current market value to find the capital gains.

Holding Period: Since you've held the shares for over 20 years, they qualify as long-term investments, which typically have a lower tax rate compared to short-term investments.

Tax Rate: The long-term capital gains tax rate for equities in India is 10% if the gain exceeds ?1 lakh in a financial year.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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I had 10 HDFC shares purchased at 1950.79 and 5 shares of HDFC bank purchased at RS 1604.84 few years back. Now after merger I was allotted 11 shares which has been added to my HDFC shares.At what rates the merger took place and is it a gain or loss to me. Today HDFC is quoting 1574.70 Please inform

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Question by DINESH - Nov 26, 2023Hindi

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Sub: HDFC Merger with HDFC Bank : Tax implications for shareholders I often read your excellent and concise replies to the tax queries of readers which are a source of guidance for the common man. I had purchased shares of HDFC as well as shares of HDFC Bank in several tranches over a long period of 17 years from 2006 onwards. Please guide me as to how to report these transactions in Schedule 112A of ITR which does not accept fractional quantities of shares and how to calculate long term capital gains. I file my IT Returns online myself.

Ans: In case of fractional quantities, you can round off the quantities and adjust Sale consideration/Cost to the extent capital gain amount remain the same.

Further, tax on LTCG was introduced from 1.02.2018. Thus, Fair Market Value as of 31st Jan 2018 is considered as cost of acquisition calculation (provided sell value is higher and actual cost is lower).

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Asked by Anonymous - Jan 03, 2024Hindi

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Hello Sir...Pl. advise my HDFC LTD; Shares of (FV.Rs.2.00) held before 31Jan2018 and since Merged into HDFC BANK LTD; will be Costed at what Price, if sold now as HDFC Bank Shares for purpose of Calculating LTCG FY.2023-24...Thanks.

Ans: The cost of purchase of shares of HDFC Ltd will be taken to be the cost of purchase of shares of the HDFC Bank (amalgamated company). In this example, the cost of purchase of 50 shares of HDFC Bank received on merger shall be ?59,524 ( ?60,000/50.4*50). This adjustment to the cost of purchase is done as against the original cost of HDFC Ltd share entitlement of 50.4 shares. Accordingly, there will be a long-term capital gain of ?30,476 ( ?90,000- ?59,524). One important thing to note here is that the benefit of grandfathering will also be available in cases where shares of the amalgamating company were purchased on or before 31 January 2018.

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Asked by Anonymous - Feb 17, 2025Hindi

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Hello Mr.Vipul...Pl guide as to which Cost Price will be applicable on Sale of HDFC Bank shares now onwards (held since 31Jan2018) and Merger of Parent HDFC Housing Fin.Ltd.(Also held since 31Jan.2018) on July2024.Since HDFC Bank Shares were also Split in 1 into 2 in Sept.2019 i.e; before Merger & after 31Jan.2018. Will the Cost be taken as Half of 31Jan.2018 Valuation or any other...??? Your Expert advice will be Appreciated....Thanks/Regards.

Ans: Dear Sir,
The cost of acquisition of shares purchased before 31 Jan 2018 and sold there after shall be as follows

COA of such investments shall be deemed to be the higher of:

The actual COA of such investments; and
The lower of-
Fair Market Value (‘FMV’) of such investments as on 31 Jan 2018; and
the Full Value of Consideration received or accruing as a result of the transfer of the capital asset i.e. the Sale Price
Further, the FMV would be the highest price quoted on the recognised stock exchange on 31 January 2018.

Though there has been split up of shares, that does not change the COA since the COA will be distributed over all the shares of respective company and Total amount of COA shall be arrived as per the method given above.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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