Tax planning at the core of several corporate restructurings in last few months

MUMBAI: Tax planning may be on their minds as several Indian companies undertook restructuring including shareholding rejig in last couple of months, say industry trackers.

Industry trackers say that many restructuring exercises were recently conducted by many Indian companies keeping in mind general anti-avoidance rule (GAAR) and future tax liabilities under minimum alternate tax ( MAT). GAAR is set to come into force by April 1, 2017.

“Considering that GAAR is being introduced from April 2017, so any future tax planning is subject to double scrutiny of tax avoidance, hence it would be logical to step up the costs at this stage itself before March 2017 for any future tax planning purposes. Also for many companies stock price have jumped substantially in the last few months, so it is probably at its highest curve since a while, so a higher price also helps to re-calibrate the cost of acquisition to a high price,” said Jeenendra Bhandari, partner MGB and Co LLP.

Apart from GAAR and MAT some of the companies are also taking in to account the future capital gains tax, say industry experts.

“If shares of a listed company are sold on the stock market before April 1, capital gains tax exemption will be available unconditionally. However if the same shares are sold after April 1, then tax exemption would be available only if STT (security transaction tax) was paid at the time of purchase. Selling listed shares before April 2017 also helps to achieve lower tax in future because of increased cost of acquisition in the hands of the buyer,” said Rajesh H Gandhi, partner, Deloitte Haskins & Sells.