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Non cumulative redeemable preference shares allotted as bonus & redeemed

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Rocks Parss

251 Points Posted on 04 June 2024

TVS Holdings issued as bonus to shareholders of TVS Motors as part of scheme of arrangement of non-convertible redeemable preference shares with coupon of 9%, The same were redeemed within a year and the principal value as well as interest were paid to registered holders after deducting TDS on the full amount of principal and interest.

What is the tax treatment in an individual holder on receipt of the said amount?

Can the said preference shares be considered as long term capital gains?

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Quick Summary

This discussion explores the tax treatment for individuals receiving bonus non-convertible redeemable preference shares. These shares, issued by TVS Holdings to Sundaram Clayton shareholders and redeemed within 12 months, included principal and interest payments after TDS deduction. The core question is whether this receipt constitutes a dividend or qualifies for long-term capital gains treatment, given the holding period was less than a year.

Rocks Parss

251 Points Posted on 04 June 2024

Sorry the bonus non-convertible redeemable preference shares were issued to shareholders of Sundaram Clayton and not TVS Motors

Further as per the terms of issue the same were to be redeemed in 12m but due to bank holidays they redeemed the same earlier resulting in holding of less than 12 months

Sorry for inconvenience