A Sebi panel has suggested tax parity be introduced for shareholders who tender their shares in open offer and those who sell through the stock market. According to the Sebi Takeover Advisory Committee, the open offer only provides an opportunity to investors to exit the company and hence need not be treated as off-market transaction.
“The Committee is of the view that there is a need to bring parity in the tax treatment given to the shareholders who tender their shares in an open offer and those who are selling the same in the open market,” the report said.
According to the present regulation, open offers are classified as off market deals, entered into between private individuals and are largely unregulated and a non-transparent.
The Committee noted that the present tax regime in India is more favorable towards the open market transactions as against open offer transactions.
“For taxation purposes, an open offer transaction is considered akin to an off-market deal, which in the view of the Committee is not desirable,” the report said.
The panel recommended that the basic objective of an open offer is to benefit investors at large by granting them a just and fair exit opportunity.
“It would perhaps not be correct to club a regulated and investor friendly activity like open offers in the same bracket as an off-market deal,” it said.