VoteUpIndia

UMBAI: Mukesh Ambani, chairman and promoter of Reliance Industries (RIL), has restructured his shareholding in India’s most valuable company by transferring his 34% stake to a set of investment firms, which include a large number of limited liability partnerships (LLPs).

RIL informed the stock exchanges about the transfer of shares among the promoter group, known as inter-se transfer in market parlance, without disclosing the rationale, but tax experts said the move would make the promoters shareholding more tax efficient.

As many as 32 investment companies transferred nearly 106 crore shares, amounting to 34% stake, on August 17, to 61 firms including 27 LLPs, RIL said in its regulatory filings. Prior to the transfer, these 32 firms owned 39% of the company. In all, the promoters own 45% of RIL through 74 firms, according to the shareholding pattern on June 30 this year.

“LLPs offer tax efficiency in respect of distribution of after tax profits as they do not attract distribution tax,” said Sunil Jain, partner, taxation at J Sagar Associates. LLPs do not attract minimum alternate tax (MAT) too, said another tax consultant, who did not wish to be named. Tax rate on income is fixed at 30% for LLPs, 3% lower than limited companies, he added.

Indian companies are liable to pay 15% dividend distribution tax which comes to 16.6% including surcharge and education cess. The RIL stock closed flat at Rs 968.10 on BSE on Wednesday, putting the company’s market capitalisation—value of shares at market price—at Rs 316, 621 crore.

[Story Source] [Contest win Rs 1000-100,000 now]

This post was submitted by Chinmaya Nayak.

Thanks to economictimes.indiatimes.com