The trading of Tata Motors differential voting rights Shares (also known as class A-ordinary shares) has been suspended from trading on stock exchanges as Friday is the last trading day before September 1, the record date for determining the shareholders of class A ordinary shares.

What Happened: Tata Motors has suspended its DVR shares from trading on stock exchanges. The company has determined a conversion ratio of 10:7, which implies that seven new ordinary shares will be issued for every ten “A” shares. This conversion will lead to a 4% reduction in share capital.

To execute this scheme, Tata Motors has formed a private trust named TML Securities Trust with Axis Trustee Services. The trust will issue new ordinary shares on behalf of “A” ordinary shareholders.

See Also: Why Kotak Sees Zomato’s Blinkit Coming Out On Top As Flipkart, Amazon Enter Quick Commerce Gold Rush

There are three tax implications for shareholders receiving ordinary shares against DVR shares. Firstly, tax deducted at source (TDS) on the deemed dividend will be paid by TML Securities Trust on behalf of shareholders.

Secondly, the trust will pay short-term capital gains tax for selling shares to recover TDS. Lastly, long-term capital gains tax will be paid by shareholders who receive ordinary shares against DVR.

The deemed dividend of ₹200 per share will attract a 10% TDS for resident and corporate shareholders. Mutual funds, AIFs and insurance companies will be exempt from this TDS.

Read Next: Bharti Airtel Rises To All-Time High As Bernstein Hikes Target Price, Supreme Court Hears AGR Petition