The government of India is likely to waive some tax norms for the buyer of IDBI Bank in a bid in order to attract more suitors for a majority stake sale in the lender, said by two government sources on Tuesday.
The government has extended the deadline for the initial bid to January 7th.
The federal finance minister is looking to relax a tax clause which would require the new buyer of IDBI Bank to pay additional tax if the share price rises post the final bid, said by one of the officials.
Share prices may rise after the bid has been invited by the government and it would be unfair to ask the new buyer to pay the tax on an increase in the price from the starting period of the bid to the end of it.
Incase the share price will increase after the bid has been invited, it will be considered as “other income” for the buyer as per tax laws, explained by Om Rajpurohit, a partner at a tax firm AMRG & associates.
The government and state-run Life Insurance Corp. (LIC) together own of about 95% in IDBI Bank and have sought initial bids from investors to buy a 60.72% in the IDBI Bank.
Once the government will start receiving the initial bids from the investors, the Reserve Bank of India (RBI) would check if they fit in the central bank’s criteria or not.
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