Fear of long-term tax force internal promoter transfers in RIL, Rcom

MUMBAI: Promoters of listed companies have initiated inter-se transfer of equity holding among group entities to save on tax.

Shares which promoters own prior to 2004 where securities transaction tax (STT) is not paid will not be eligible for exemption from long term capital gains tax (LTCG), after 31st March 2017. So they are doing inter se transfer whereby they end-up paying STT and save on LTCG.

The changes to section 10(58) effect in capital gains tax norms were proposed in budget in February 2017.

Experts say the recent internal transfer of promoter shares in Reliance Industries could be largely due to the changes in tax regime in the budget.

RIL promoters on Thursday internally transferred shares worth around Rs 50,000 crore or over 12% of holding in a block deal. Promoters of Reliance Communication too transferred over 1.8 crore shares internally on Wednesday.

Experts say many other promoters may follow.