Should investors participate in open offers?
When selling shares in an open offer, two things have to be kept in mind. One, the price being offered and two, the tax implication. In most cases, as soon as the open offer price is announced, there is a sharp surge in the share price as traders reduce the gap between the existing and offer price, in the hope that the company will be forced to hike the open offer price further. They are taxed like debt funds - 10 per cent with indexation and 20 per cent with indexation benefits.
How is the taxation different from a secondary-market transaction?
If the same shares are sold in the secondary market, the short-term capital gains tax is 15 per cent and there is no long-term capital gains tax after a year.