Tips to save IPO listing gains tax!
In the years 2023 and 2024, many IPOs brought huge earnings for the investors. But tax also has to be paid on this! What is the tax rule on booking listing gains from IPO? How can tax liability on listing gains be reduced? How will the tax be calculated on selling IPO shares?
Shares of leading stock exchange NSE more than doubled in the last one year. The scrip has jumped 110% to Rs 2,100 in the unlisted market from Rs 1,000 last year. NSE is one of the most anticipated IPO for D-Street since many years.
NSE remains the world’s largest derivatives exchange for the second consecutive year in 2020 in terms of the number of contracts traded, according to the Futures Industry Association (FIA). In India, with two actively working stock exchanges in the equity segment, NSE enjoys a near-monopoly status in futures and options and has clear dominance in the cash market too.
Reasons behind the surge
Stellar earnings
NSE posted stellar earnings for the year 2020-21. Revenue from operations jumped to Rs 5,624.82 crores in FY 2020-21 from Rs 3,507.93 crores in FY 2019-20, implying 60% jump YoY. Similarly, NSE reported Rs 3,573.42 crore of PAT and Rs 72 EPS for the year FY 2020-21, implying 90% growth in PAT and EPS compared to the previous financial year.
Relief from SAT
Recently, with reference to the co-location case Securities Appellate Tribunal (SAT) provided relief and has allowed the exchange to withdraw over Rs 6,000 crore from the escrow account deposited on Sebi’s directive. The amount may now be used for its business purpose.
Covid-19 Pandemic- ‘Blessing in disguise’?
The Covid-19 pandemic has proved as a ‘blessing in disguise’ for exchanges, depositories and broking companies as a lot of retail investors rushed to the capital markets. According to Sebi data, demat addition rose to an all-time high of 10.7 million between April 2020 – January 2021. Stellar gains in IPOs and outperformance in secondary markets as well as easy access to the stock market has also fuelled interest and attracted new entrants.
Ground to cover
NSE holds a highly dominant position given its near monopoly. Indian equity markets are still in a nascent stage and highly under-penetrated, even less than 4% population in India invests in equities which is quite low compared to other countries like the USA and China which leaves enough headroom for companies like NSE to flourish.
Any scope for retail investor?
Although unlisted shares of NSE are in high demand among retail investors, it is quite difficult for them to invest in it. Unlike purchasing any other unlisted shares, shares of NSE cannot be accumulated smoothly due to a cumbersome process and it involves a lot of paper work which is costly and time-consuming. The share transfer process may take up to 1-3 months – subject to approval. Above all this, the shares are traded in bulk lot sizes only.
(Disclaimer- The writer is the founder of UnlistedArena.com which deals in pre-IPO and unlisted shares. Views expressed are personal and should not be construed as any recommendation to invest/trade.)