Tendering Indian shares in a delisting, open offer or squeeze-out

When you tender your shares into a delisting offer, an acquirer's open offer or a squeeze-out, you are selling them, so it is a transfer and a capital gain, computed the ordinary way under Sections 45 and 48, the price you receive less your cost. So far, so normal.

The surprise is the rate. The concessional treatment that listed-share investors expect, the lower long-term rate with a ₹1.25 lakh annual exemption and the grandfathering of pre-2018 gains, all sits under Section 112A, and that section applies only where securities transaction tax was paid on the sale. Tenders into delistings, open offers and squeeze-outs are usually structured outside the STT net, even when routed through an exchange window, so no STT is paid. Which means Section 112A does not apply, and your gain drops into the general rule under Section 112 instead. There, a long-term gain is still 12.5%, but you lose the ₹1.25 lakh exemption and the grandfathering, and a short-term gain is taxed at your slab rate rather than the flat 20%. So the same shares, tendered rather than sold on the market, can carry more tax.

For an NRI there is a withholding step. Because you are a non-resident, the acquirer or the company must deduct TDS under Section 195 on the sum they pay you, on the gain, not the flat 1% that applies to a resident, and there is no small threshold. They will withhold at the applicable capital-gains rate unless you reduce it.

You can reduce it. A lower-deduction certificate, supported by your cost computation, brings the withholding down to the real gain rather than a gross figure, and a treaty rate can apply where it helps. The main thing is to go in knowing the gain is taxed under the general rule, not the concessional one, so you are not caught out by a bigger bill than a market sale would have carried, and so the TDS is set correctly. A practising CA computes the gain on the right basis, gets the lower-deduction certificate, and reconciles the TDS.