General Guidelines for ITC Shareholders - How to Split the Purchase Cost Between ITC and ITC Hotels Shares After Demerger
ITC Ltd. has officially separated its hotels division, creating a new company called ITC Hotels Ltd. (ITCHL). This means ITC shareholders will receive shares of ITCHL as per the demerger ratio.
How Will Shareholders Benefit?
If you held ITC shares as of the record date (January 6, 2025), you will get shares of ITC Hotels Ltd. in the ratio of 1:10. This means for every 10 shares of ITC Ltd., you will receive 1 share of ITCHL.
Tax Implications for ITC Shareholders
Taxes will apply only when you sell either your ITC shares or ITCHL shares. The tax treatment depends on how long you have held the shares:
Short-term capital gains (STCG) – If sold within one year of purchase (for listed shares).
Long-term capital gains (LTCG) – If held for more than one year.
The holding period for ITC Hotels shares will be counted from the date when you originally bought ITC Ltd. shares.
Cost of Acquisition – How It Works
Since the company is splitting its business, the original purchase price of ITC Ltd. shares will be distributed between ITC and ITCHL based on their relative values. Here’s an example:
Suppose you bought 1,000 shares of ITC at ₹400 per share. Your total investment before the demerger was ₹4,00,000.
After the demerger, you receive 100 shares of ITCHL.
The company has allocated 86.49% of the cost to ITC and 13.51% to ITCHL.
So, the revised cost of your shares will be:
ITC Ltd.: ₹3,45,960 (86.49% of ₹4,00,000)
ITC Hotels Ltd.: ₹54,040 (13.51% of ₹4,00,000)
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