Merger related taxation

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This discussion clarifies capital gains tax implications for shareholders of Gateway Distriparks who purchased shares before 2018 and received new shares after a merger. The key takeaway is that the 'grandfathering' benefit, which exempts gains on shares held before January 31, 2018, still applies even if the original company no longer exists. The purchase date for calculating capital gains remains the original purchase date, and the cost basis is determined by the fair market value of the original shares as of January 31, 2018, adjusted for the merger ratio.

Thelappillil Linson

Thelappillil Linson (Querist)
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27 July 2025 Sir / Madam,
I have shares of Gateway distriparks purchased before 2018 (grandfathering concept) . I got 4 shares of the resulting company after the merger and relisting in 2021-2022. I have not sold the shares so far. What shall be the capital gains if I sell now and what shall be the date of purchase?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 July 2025 1. The cost of purchased would be as per FMV of the original shares as on 31.01.2018; w.r.t its merger ratio to new shares.
2. On or before 31st Jan, 2018.

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Thelappillil Linson

Thelappillil Linson (Querist)
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28 July 2025 You mean to say that the purchase date of the shares shall be 2016 or 2017 (I Purchased the shares in 2016 or 2017.) though the shares of the merged entity was allotted in Feb / Mar 2022.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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28 July 2025 Yes; latest 31.01.2018, as you have not purchased them in 2022.. For capital gain calculation the investment date is concerned. Only thing, the rate for each allotted share will be in proportionate to the total amount of investment divided by no. of new shares,

Thelappillil Linson

Thelappillil Linson (Querist)
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29 July 2025 Thanks for your response. One last query in this regard. The GDL (Gateway Distriparks Limited) has merged into its subsidiary and formed the present GDL in 2022. They relisted under different ISIN and BSE code. My question is whether the grandfathering benefits will be applicable now as the original GDL does not exist as on date. Your answer shall be useful to many. Thanks in advance.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 July 2025 Even if the new company formed due to merger, but you have not purchased new company shares. You had purchased old co. shares before 2018. So you can get grandfathering benefit based on your investment, even though you are selling new company shares because of merger of your old company investment.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 September 2025 Good luck...

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