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IDBI Bank buyer to get tax waiver on LIC stake as well
June 05, 2023
The Centre has extended a specific tax waiver for buyers of government stakes in companies being privatised to those who acquire stakes held by state-run entities as well. The immediate beneficiary of the move will be the potential buyer of IDBI Bank, which is promoted by Life Insurance Corporation (LIC).
In essence, the change in tax rules would exempt the buyer of IDBI Bank from tax liability on notional gains if the market value of shares sold by LIC is higher than the price discovered through a competitive bidding process. A similar tax concession is already available to buyers in strategic disinvestment deals, where the government is the seller.
On January 7, the Centre received multiple expressions of interest (EoIs) from domestic and foreign investors for the 60.72% stake in IDBI Bank, which will go to the successful bidder along with management control. The offer comprises 30.48% from the government and 30.24% from LIC.
With the processing of the EoIs received for IDBI Bank moving on to the next stage, financial bids for the bank are expected by September.
Section 56(2)(x) shall not apply to “any movable property, being equity shares, of a public sector company or a company, received by a person from a public sector company or the Central Government or any State Government under strategic disinvestment”, the Central Board of Direct Taxes (CBDT) said, notifying the amendment to the relevant rule.
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