ICICI Securities delisting may trigger unexpected tax liabilities

ICICI Securities shareholders are facing potential tax consequences from a recent share-swap deal. The brokerage’s shares will trade on domestic exchanges for the last time on Friday. Under a scheme of arrangement, ICICI Bank will issue 67 shares for every 100 shares of ICICI Securities owned. Shareholders receiving ICICI Bank shares might have to pay capital gains tax. Typically, investors do not owe taxes in mergers or acquisitions, but this case is different. Tax consultants warn that shareholders will owe taxes even without selling the new ICICI Bank shares. There are no exemptions for this share swap. The record date to identify eligible shareholders is set for March 24. This will determine who will have their ICICI Securities shares cancelled in exchange for ICICI Bank shares. Capital gains will be calculated based on the fair market value of the bank shares received compared to the original purchase cost of the brokerage shares. For example, if an ICICI Securities shareholder gets 67 ICICI Bank shares purchased at ₹713.80 each, with bank shares trading at ₹1,313, they could owe about ₹2,074 in long-term capital gains tax for every 100 shares. This tax outcome is different from typical transactions, which often qualify for tax-neutral treatment. ICICI Securities shares have increased by 23% over the past year, closing at ₹877 on Wednesday. Meanwhile, ICICI Bank shares also rose by 21%, ending at ₹1,313. The recent budget has reduced the long-term capital gains tax rate to 12.5%, which may help ease the tax burden for some investors. However, short-term gains will still be taxed based on individual income tax rates.