Tax treatment of amount received in lieu of fractional shares

Tax queries 1155 views 3 replies

devinder malhotra

5 Points Joined July 2023

Pl. advise about tax treatment of the amount received for the shares that cannot be issued in full (fractional shares) at the time of:1.Amalgamation(e.g. LTI & Mindtree);2. Issue of bonus shares (e.g. Varun Beverages); and.3. Issue of split shares.If amount received in lieu of fractional shares are taxable,Pl advise under which head of income the amount would be taxed in each scenario and how the said amount would be shown in ITR2 AY 23-24

Replies (3)

Samantha J

1236 Points Joined March 2019

IT act is silent on fractional shares amount.It is not Dividend, it's not capital gains either.By the way what is the actual amount credited to your bank account linked with demat to be able to understand the issue in true perspective.

devinder malhotra

5 Points Joined July 2023

*As per amalgamated company - LTIMindtree Limited ".. In terms of the applicable tax provisions, distribution of sale proceeds of fractional entitlements shall be construed as "Income in the nature of capital gains" and accordingly applicable income tax shall be deducted at source ('TDS')

There is no TDS obligation in the case of resident shareholders.."

*In similar fashion,sale proceeds of fractional bonus share were remitted into bank account by bonus issuing company without specifying nature of income