Paras Defence And Space Technologies Limited IPO Listing and capital gain tax on selling shares in IPO allotment | Capital gain on IPO

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Paras Defence and Space Technologies are primarily engaged in the designing, developing, manufacturing, and testing of a variety of defence and space engineering products and solutions. The company has five major product category offerings – Defence & Space Optics, Defence Electronics, Heavy Engineering, Electromagnetic Pulse Protection Solutions, and Niche Technologies. Paras Defence and Space Technologies is the only Indian company with the design capability for space-optics and opto-mechanical assemblies and is one of the leading providers of optics for various Indian defence and space programs. The company also delivers customized turnkey projects in the defence segment. The company has partnered with some of the leading technology companies around the world to indigenize advanced technologies in the defence and space sectors for the Indian market.

Company Financials:

Paras Defence and Space Technologies IPO Subscription Status

The Paras Defence and Space Technologies IPO is subscribed 304.26 times on Sep 23, 2021 17:00. The public issue subscribed 112.81 in the retail category, 169.65 in the QIB category, and 927.70 in the NII category.

Application Wise IPO Subscription (Retail): 89.61 times

The listing date for IPO is 01.10.2021.

The IPO has listed with a massive Premium of 171%.

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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