CarTrade IPO Listing and capital gain tax on selling shares in IPO allotment | Capital gain on IPO

Incorporated in 2000, CarTrade Tech Ltd is a multi-channel auto platform provider company. The company operates various brands such as CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz. The platform connects new and used automobile customers, vehicle dealers, vehicle OEMs, and other businesses to buy and sell different types of vehicles. The company offers a variety of solutions across automotive transactions for buying, selling, marketing, financing, and other activities.

 

Company Financials:

Summary of financial Information (Restated Consolidated)

Particulars	For the year/period ended (₹ in million)
	31-Mar-21	31-Mar-20	31-Mar-19
Total Assets	19,301.99	14,704.06	14,270.94
Total Revenue	2,815.23	3,184.45	2,668.05
Profit After Tax	1,010.74	312.94	259.17

 

Objects of the Issue:

The company aims to utilizes the net proceed towards the following objectives;

• To carry out an offer for sale.
• To achieve the benefits of listing the Equity Shares on the stock exchanges.

 

CarTrade Tech IPO Subscription Status

The CarTrade Tech IPO is subscribed 20.29x times. The public issue subscribed 2.75x in the retail category, 35.45x in the QIB category, and 41.00x in the NII category. Check Day by Day Subscription Details (Live Status)

Category	IPO Subscription
QIB	35.45x
NII	41.00x
RII	2.75x
Total	20.29x

 

The listing date for IPO was 20.08.2021.

 

Capital gain tax on sale of shares received in IPO allotment:

Now, let’s talk about the taxability of gain earned if the shares are sold on the listing date itself to get listing gain by way of premium on listing and if the same is sold after some time.

 

There can be two types of gain’s: (i) long term or (ii) short term.

 

Since the shares are going to be listed on stock exchange hence, if the shareholder sell such shares on the recognised stock exchange, such shares will be considered as long term asset if they are held for more than one year and will be considered as short term if they are held for a period less than 1 year.

 

The taxability of such shares will be calculated based on section “111A for short term gain” and “112A for long term gain” wherein tax rate of short term gain is 15% of the gain and for long term gain the tax rate is 10% of the gain amount.

 

Looking at the current scenario we know that many people sell their shares on the listing day itself to earn the listing premium and hence the gain earned by such transaction will be considered as short term capital gain as the assessee held shares for less than one year period and hence he/ she shall be liable to pay tax at the rate of 15% on such gain under section 111A of the Income tax Act.

 

However if the shareholder holds the share for more than one year from the date of listing as the specialty chemical sector is likely to see boom in next year then he or she shall be liable to pay tax at the rate of 10% on the gain amount under section 112A of the Income tax Act.

 

Further, for long term capital gain no tax needs to be paid on the initial Rs. 1 lakh gain u/s 112A of the Income tax Act and no benefit of indexation will be available in case of long term gain since the shares are listed and sold on recognized stock exchange.

 

In case of long term capital gain one can claim exemption u/s 54F by investing the entire sale consideration in a new residential house and if the conditions mentioned under section 54F are fulfilled, other than section 54F there are no other way to save capital gain tax.

 

Also, the tax rates mentioned above are just base rates and surcharge and cess will also be added accordingly on such tax rates.

 

 

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