Bank of baroda

BANK OF BARODA
2.
TO THE SHAREHOLDERS OF THE BANK:
The following are the benefits as per the Current Tax Laws to a prospective investor. It may be, however, noted that
in view of the individual nature of tax consequences, prospective investors are advised to consult his/her/their own
tax advisor with respect to specific tax consequences of his/her/their participation in public issue of the Bank:
1.
To all shareholders:
a)
The following incomes earned are exempt from Income Tax in the hands of the shareholders:
1.
Under Section 10 (34), income by way of dividends referred to in section 115-O of the Income Tax
Act, 1961;
2.
Under Section 10(38), income arising from the transfer of an Equity Share of the Bank, which by
virtue of holding by the Investor is a Long Term Capital Asset (“Long Term Capital Asset” is an
asset held by the investor for more than twelve months) and where the transaction is chargeable
to Securities Transaction Tax under Chapter VII of the Finance (No. 2) Act, 2004.
b)
Under Section 111A of the Act, any income chargeable under the head “Capital gains”, arising from the
transfer of shares of the Bank held by an Investor as a Short Term Capital Asset (“Short Term Capital
Asset” is defined as an asset held for not more than twelve months immediately preceding the date of
its transfer) and such transaction is chargeable to Securities Transaction Tax under Finance (No. 2) Act,
2004, then the tax payable by the Investor on the such income shall be the aggregate of the amount of
income-tax calculated on such short-term capital gains at the rate of ten per cent. Further, in the case
where the Investor is a Resident Individual/Hindu Undivided Family, and the total income as reduced by
such short-term capital gains is below the maximum amount not chargeable to income-tax, then, such
short-term capital gains shall be reduced by the amount by which the total income as so reduced falls
short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such
short-term capital gains shall be computed at the rate of ten per cent.
c)
Under Section 112 of the Act, income on transfer of shares would be chargeable as Long Term Capital
Gains under the head “Capital Gains”, if such transaction was not chargeable to Securities Transaction
Tax under Finance (No. 2) Act, 2004, and taxed at a rate of 20% (plus applicable surcharge and
education cess) after indexation as provided in the second proviso of Section 48; or at 10% (plus
applicable surcharges and education cess) (without indexation), at the option of the shareholders. In
such a case, the following options are also available to the shareholder:
1.
Under Section 54EC of the Act, where the Investor has, at any time within a period of six months
after the date of such transfer, invested the whole or any part of capital gains in a long-term
specified asset, the said capital gains shall be as under:
a.
where the cost of the long-term specified asset is not less than the capital gain arising from
the transfer of the original asset, the whole of such capital gain shall not be charged under
section 45;
b.
where the cost of the long-term specified asset is less than the capital gain arising from the
transfer of the original asset, so much of the capital gain as bears to the whole of the capital
gain the same proportion as the cost of acquisition of the long-term specified asset bears to
the whole of the capital gain, shall not be charged under section 45.
2.
Under Section 54ED of the Act, where a capital gain arises from the transfer on sale of shares of
the Bank and the Investor has, within a period of six months after the date of such transfer,
invested the whole or any part of the capital gain in equity shares forming part of an eligible issue
of capital (such equity shares being hereinafter referred to as the specified equity shares), the
said capital gain shall be as under:
a.
where the cost of the specified equity shares is not less than the capital gain arising from
the transfer of the original asset, the whole of such capital gain shall not be charged under
section 45;

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b.
where the cost of the specified equity shares is less than the capital gain arising from the
transfer of the original asset, so much of the capital gain as bears to the whole of the capital
gain the same proportion as the cost of the specified equity shares acquired bears to the
whole of the capital gain shall not be charged under section 45.
3.
Under Section 54F of the Act, (subject to certain conditions specified therein) in the case of an
Investor being an Individual or a Hindu Undivided Family, the Capital Gain arising from the transfer
of shares of the Bank and the Investor has, within a period of one year before or two years after
the date on which the transfer took place, purchased, or has within a period of three years after
that date constructed, a residential house (hereinafter referred to as the new asset) the capital
gain shall be as under:
a.
where the cost of the new asset is not less than the net consideration in respect of the
original asset, the whole of such capital gain shall not be charged under section 45;
b.
where the cost of the new asset is less than the net consideration in respect of the original
asset, so much of the capital gain as bears to the whole of the capital gain the same
proportion as the cost of the new asset bears to the net consideration, shall not be charged
under section 45.
2.
To non-resident shareholders in particular:
1.
In case of non-resident shareholders governed by the provisions of the Chapter XII A of the Act, the
following benefits are available to such shareholders:
a)
Under section 115E of the Act, where the total income of the Investor includes dividend (not being
dividend referred to 115-0) or long-term capital gains (such transaction is not chargeable to
Securities Transaction Tax under Finance (No. 2) Act, 2004), then the tax payable by him shall be
the aggregate of the amount of income-tax calculated on the income in respect of investment
income referred herein above at the rate of twenty per cent, and the amount of income-tax calculated
on the income by way of long-term capital gains referred hereinabove at the rate of ten percent.
b)
Under Section 115F of the Act, where the Investor having Long Term Capital Gains (not exempt
under section 10 (38) of the Act) arising from the transfer of shares of the Bank has invested
within a period of six months after the date of transfer, the whole or any part of the net consideration
in specified asset or in any savings certificates referred to in clause (4B) of section 10 then, such
capital gains shall be as under:
i)
where the cost of the new asset is not less than the net consideration in respect of the
original asset, the whole of such capital gain shall not be charged under section 45;
ii)
where the cost of the new asset is less than the net consideration in respect of the original
asset, so much of the capital gain as bears to the whole of the capital gain the same
proportion as the cost of acquisition of the new asset bears to the net consideration shall not
be charged under section 45.
iii)
Under Section 115H of the Act, where the Non-Resident Indian investor, subsequently
becomes assessable as a resident in India in respect of the total income of any subsequent
year, he may, at his option, furnish to the Assessing Officer a declaration in writing along
with his return of income under section 139 for the assessment year for which he is so
assessable, to the effect that the provisions of this Chapter XII A shall continue to apply to
him in relation to the income derived from the shares of the Bank (in this case would also
be a foreign exchange asset) and if he does so, the provisions of the Chapter XIIA shall
continue to apply to him in relation to such income for that assessment year and for every
subsequent assessment year until the transfer or conversion (otherwise than by transfer) into
money of such assets.
2.
Under Section 115AD of the Act, where the total income of a Foreign Institutional Investor (“Foreign
Institutional Investor” means such investor as the Central Government may, by notification in the Official

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