Tata Motors’ much awaited demerger, effective October 1, 2025, is set to detached its commercial vehicle (CV) and passenger vehicle (PV) businesses into two separate publicly listed companies. Shareholders who are currently holding the shares of Tata Motors on the record date of October 14 will receive one share of TML Commercial Vehicles Ltd (TMLCV) for every share they owned, expected to be listed in the starting of November.
Demerger of Tata Motors: No Capital Gains Tax
This corporate reform comes with substantial tax implications for investors. Significantly, the demerger itself is not taxable under the Income Tax Act, which means investors will not have to pay any capital gains tax at after getting a new share. Though, the actual cost of acquisition must be cautiously allocated between the parent and newly formed entity, on the basis of their net book value (NBV) ratio. This split in cost forms the basis for calculating capital gains when the shares are ultimately sold.
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Furthermore, the duration of holding the original shares transmits over to the new shares, which means investors who have the shares of Tata Motors for more than 12 months prior to this demerger will profit from long-term capital gains tax when selling shares of either company.
Tata Capital IPO: Additional Opportunity for the Investors
Separately, speculation about the Tata Capital IPO set for October 6 before Diwali festival is generating buzz. Investors are excited about this Rs.15,511 crore public offering and are seeing it as another huge financial names grabbing their attention. Though it offers huge investment opportunities but it may also change their strategy, valuation, and market outlook towards Tata Motors and TML Commercial Vehicles Ltd (TMLCV).
Tata Sons, the holding company of the Tata Group, have a majority stake in Tata Capital, with external investors, together with the International Finance Corporation (IFC) and several other Tata subsidiaries, own the rest of the shares. Reports recommend that the LIC of India is possibly going to be an important investor in Tata Capital IPO, particularly in the anchor investor percentage.
Shareholders, therefore, are also advice to exactly track the cost allocation and holding tenure for both Tata Motors and TMLCV shares after demerger. Appropriate record-keeping will confirm correct tax reporting and preventing overpayment. Through this demerger solving new investment paths, investors position to benefit, as long as they navigate the tax rules cautiously.
Ankur Mishra is a journalist who covers an extensive range of news, from business, stock markets, IPOs to geopolitics, world affairs, international crises, and general news. With over a decade of experience in the business domain, Ankur has been associated with some of the reputed media brands. Through a sharp eye on global marketplaces along with deep insights and analysis of business strategies, Ankur brings simplicity to the complex economic matrix to decode market trends and empower people.
He is committed to entrenched data, facts, research, solutions, and a dedication to value-based journalism. He has covered trade tariff wars, international alliances, corporate policies, government initiatives, regulatory developments, along with micro- and macroeconomic shifts impacting global fiscal dynamics.
