Vedanta demerger: How is cost of acquisition calculated for LTCG tax?

Vedanta Group’s four demerged companies, Vedanta Aluminium Metal, Vedanta Power, Vedanta Oil and Gas, and Vedanta Iron and Steel, made their stock market debut on June 15. This happened after the company's restructuring.

Holding period remains unchanged

Tax experts clarify that a demerger does not reset the holding period of shares. This means your original purchase date of Vedanta shares continues to apply even after you receive shares in the new companies.

“Capital gains on the sale of shares are calculated based on the holding period and the date of acquisition of shares. If someone receives shares as part of a merger, or demerger, the holding period is counted from the date of purchase of shares,” said Mumbai-based tax and investment expert Balwant Jain.

This means that if an investor sells shares after holding them for more than one year, the gains will qualify as long-term capital gains. However, if the holding period is less than one year, the gains will be treated as short-term capital gains.

How the cost of acquisition is split

Let us try to understand this with an example. If your total investment in Vedanta was ₹2,50,000 for 500 shares, the cost would now be split like this:

This split cost will be used later when you sell any of these shares to calculate capital gains.

How LTCG is calculated

For listed equity shares, the formula remains:

LTCG = Sale price - (cost of acquisition + expenses on transfer)

To understand the LTCG calculation, consider only one of the four demerged entities, Vedanta Aluminium Metal Ltd, as an example. The tax calculation for the other entities will differ because each has a different cost of acquisition based on the prescribed allocation ratio.

If an investor received 500 shares of Vedanta Aluminium Metal after the demerger and sold them at its listing price of ₹527 per share:

Sale value = 500 × ₹527 = ₹2,63,500

Cost of acquisition = ₹17,875

LTCG = ₹2,63,500 - ₹17,875 = ₹2,45,625

Less: LTCG exemption available per financial year (₹1,25,000)

Taxable LTCG : ₹1,20,625 LTCG Tax @ 12.5%: ₹15,078

At a 12.5% LTCG tax rate, the tax would be approximately ₹15,078.

The above assumes the investor has not already used the ₹1.25 lakh annual LTCG exemption on other equity or equity-oriented investments during the same financial year.

So, your taxable gain depends heavily on how the original cost is allocated across the new companies.

All these four demerged firms got listed on the NSE also.

Vedanta Aluminium Metal started trading at ₹522, Vedanta Power listed at ₹41.80, Vedanta Oil and Gas at ₹38 and Vedanta Iron and Steel at ₹20 on the NSE.

The newly listed entities began trading on both NSE and BSE following the approved demerger scheme, which was sanctioned by the National Company Law Tribunal in December 2025. Under the 1:1 ratio, shareholders received one share in each demerged entity for every Vedanta share held.