Jio Financial shares list on bourses; what’s the tax liability for investors?

After being part of key indices at a constant price for nearly a month, Jio Financial Services made its official debut on the exchanges, listing at a price slightly higher than its derived price.

While the listing was a booster shot, the stock succumbed to selling, largely by passive index funds, who needed to adjust their portfolio ahead of the exit of Jio Financial from Nifty 50 and Sensex.

The stock will be removed from the indices on Thursday, provided it does not hit the price band for two consecutive days.

In case, during the first two days of the three days, the stock hits the price band on both days, the exclusion date will be deferred by another three days.

Potential Tax Implications
The holders of Jio Financial shares will be subject to short-term/long-term capital gains tax, and the same will be determined based on their holding period.

The capital gain is based on the cost of acquisition, the price at which shares of a company are bought.

Prior to the demerger, RIL had apportioned 95.3% as cost of acquisition for its shares and 4.68% for Jio Financial.

Basis this, investors can calculate the capital gains tax they need to pay during the sale of shares.

If RIL shares were purchased by an investor more than a year ago from the selling date, he/she will be charged a long-term capital gains (LTCG) tax of 10%. However, this tax is chargeable only if the capital gains exceeds Rs 1,00,000.

If RIL shares were purchased less than a year ago, then he/she will be charged a short-term capital gains tax (STCG) of 15%.

While any sale or purchase of shares attract capital gains tax, the shares received by shareholders due to a merger/demerger scheme, are not considered transfer of shares by the tax department.

In such a scenario, the holding period is counted from the date of allotment of shares. However, the tax liability for the shareholder is only during the sale of shares.

On August 10, shares of Jio Financial Services were credited in the demat accounts of the shareholders of Reliance Industries as part of the demerger scheme.

Shareholders of RIL received 1 share of Jio Financial for every one held by them in the parent company.

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