What are the tax implications for right entitlement transfers?

I am a non-resident Indian (NRI) residing in the UAE. I hold shares of Mahindra Logistics Ltd, which has announced a rights issue. I don't want to subscribe and plan to sell the rights entitlements to a fellow NRI. What are the tax implications of doing that?

- Harshal Bhuta

shares) is distinct from the assets. The Supreme Court has held that the right to subscribe to additional securities on a rights basis arises only after the company announces the issue. Until then, this right, though inherent in the shareholding, remains inchoate and does not crystallise. Upon announcement, this 'eight entitlement' (RE) becomes a separate and independent capital asset, transferable independently of the underlying shareholding. If not exercised or renounced before the issue closing date, REs lapse and are extinguished.