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Mr. Ravi Agarwal, I.R.S.
Chairman
Central Board of Direct Taxes
Ministry of Finance
Government of India
North Block
New Delhi – 110 001
Sir,
Re : Representation to address anomaly in the holding period of undertaking u/s. 50B and shares sold in Offer For Sale (OFS) in Initial Public Offer to turn long term
The Finance (No.2) 2024 reformed the capital gains taxation regime by rationalisation of period of holding and long term/short term capital gains tax rates for different types of capital assets.
The holding period for all capital assets was rationalised to 1 year for listed securities and 2 years for other assets. However, there exists an anomaly for the period of holding for following two types of assets.
· Business undertaking referred in s.50B for taxation of slump sale of undertaking
· Shares sold in Offer for sale (OFS) in an IPO
The holding period for undertaking to turn long term is 3 years whereas it is 2 years for all other assets. In case of shares sold in OFS, the holding period is 2 years, although all other tax attributes are the same as listed securities (viz. applicability of STT, LTCG rate of 12.5% u/s. 112A, STCG rate of 20% u/s. 111A, substitution of fair market value as on 31 January 2018) for which the holding period is 1 year to turn long term.
Since the above appear to be unintended anomalies, we request the Government to kindly address the same in the next Budget to align with the new capital gains tax regime. It is recommended to amend first proviso to s.50B to substitute “thirty-six” months with “twenty-four” months to reduce the period of holding of business undertaking to turn long term It is also recommended to amend first proviso to s.2(42A) to include unlisted shares sold under an offer for sale to the public included in an initial public offer to reduce the holding period for such shares to turn long term from 24 months to 12 months.
In this regard, we are pleased to furnish a detailed representation along with text of suggested amendments for your kind consideration. Our representatives shall be happy to discuss and provide any further clarifications to facilitate the necessary amendments.
Thanking you,
Yours sincerely,
Sandeep Khosla
Director General
