Unicorn IPOs may bring tax woes for early investors

A grandfathering clause is a provision in tax laws in which an old regulation continues to apply to some existing situations while a new rule will apply to all future cases.

Synopsis

Prior to getting listed unicorns have to bring down the per share price, so that small retail investors can participate in the issuance. The only way to do so is to issue bonus shares — a step that may not be protected under the tax laws and will be treated as fresh issuance, say tax experts.

Mumbai: Some of the large investors in unicorns that are being listed on the capital markets could face tax complications on the issuance of bonus shares and may end up coughing up capital gains tax sans grandfathering benefit.

Early investors in unicorns such as Paytm, Mobikwik, Policybazaar and Zomato could face between 10% and 15% tax on the bonus issue of shares.

Investors will have to cough up millions on their realised gains, say tax

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