Vedanta Demerger Tax Guide: How to Calculate Your Tax After Vedanta's 1-to-5 Demerger Split? Expert Decodes

Vedanta Demerger Decoded: One of the biggest corporate restructuring in the Indian stock market history, Vedanta demerger completed in May. Since then, investors are eagerly waiting for listing details about Vedanta's demerged entities. Amid Vedanta demerger buzz, shares of the residual company bounced back sharply on Thursday, June 11. Vedanta stock closed in green today after snapping its three-day losing streak.

Company officials have hinted that Vedanta's demerged entities are expected to be listed on exchanges in second half of June. As Vedanta demerger listing timeline is awaited investors want to understand tax implications of holding Vedanta and the four new stocks.

Vedanta's '1-to-5' Demerger: What Will Be The Tax Implication?

First things first, merely receiving shares of four new Vedanta entities in their demat account will not attract taxes. "Pursuant to the demerger of Vedanta Limited, shareholders have received shares in four resulting companies. This is not considered as a transfer and therefore no capital gains tax arises at the time of receipt of these shares," explains Amit Amlani, Executive Director, Direct Tax, Nexdigm. However, sale of Vedanta and four other stocks can attract capital gains tax.

Vedanta Demerger And Capital Gains Tax

Once all the newly demergerd Vedanta entities get listed on exchanges, eligible Vedanta shareholders will have five separate entities. Each of thes Vedanta entities will be treated independently for tax purposes. Tax liability will arise only when investors will sell the shares and convert them into cash.

Vedanta Demerger Tax Implications: Key Things To Know Before Selling Vedanta Demerged Shares

Vedanta's cost of acquisition: They must ensure that the original cost of Vedanta shares is correctly apportioned among all five entities based on the prescribed ratio, highlighted Amlani.

Holding Period

Investors holding period for the stock will also include holding the original Vedanta stock. And the total duration of holding the stock would help in classifying gains as short-term or long-term.

Vedanta Demerger Tax Implication: How Tax Will Be Calculated?

The capital gains tax at the time of selling Vedanta and four new entities's stocks will be computed separately for each company "as the difference between sale consideration and the respective cost of acquisition," noted Amlani.

"The original cost of Vedanta shares must be apportioned between Vedanta Limited and the four resulting companies in accordance with the Income-tax Act, 2025. As per the provisions, such apportionment is based on the proportion of the net book value of assets transferred to each resulting company bearing to the net worth of the demerged company (i.e. Vedanta Limited) prior to the demerger," added Amlani while pointing that the cost apportionment ratio is generally communicated by the company to shareholders.

Vedanta's Cost of Aportionment Ratio

The cost of apportionment ratio is based on net worth of Vedanta Limited and net assets of respective undertakings. The total allocation for new companies is identified as 52.34% to Vedanta Limited, 7.15% to Vedanta Aluminium Metal Limited, 12.23% to Talwandi Sabo Power Limited, 21.49% to Malco Energy Limited, and 6.79% to Vedanta Iron and Steel Limited.

Vedanta Demerger Recap

The Anil Agarwal-led mining giant had fixed May 1 as the demerger record date. Investors who owned Vedanta stock before April 29 became eligible for receiving new companies' stocks in the ratio of 1:1.