Sebi plans tax-friendly offer process - Times of India

MUMBAI: Market regulator Sebi on Monday allowed tendering of shares in mergers & acquisitions (M&As), buybacks and delisting offers through the stock exchange platform, which will make such processes more tax-friendly for shareholders, allow warehousing of shares ahead of such deals. The move may impact arbitrageurs.

Companies ask shareholders to tender shares in such offers directly to them. Sebi said from July 1, companies going for open offers in M&As, buybacks and delisting will be allowed to follow either the old mechanism of direct tendering or take the stock exchange route where brokers acting for the companies can accept shares from shareholders.

According to brokers, under the existing system, since the shares are transferred directly to the acquiring company (called the off-market process), no securities transaction tax (STT) is paid by any of the parties involved in the transaction. Hence, according to income tax rules, the selling shareholders pay applicable income tax or capital gains tax. Under the new mechanism, the seller will pay STT and will not have to pay any capital gains tax if the period of holding at the time of selling is more than a year, they said.

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