CONSULTATION ON PROPOSEDTREATMENT OF INDIAN LONGTERM CAPITAL GAINS TAX IN THE
MSCI EQUITY INDEXES
September 2019
This consultation may or may not lead to the implementation of the proposed changes in the MSCI Indexes. Consultation feedback willremain confidential. MSCI may publicly disclose feedback if specifically requested by specific market participants. In that case, the relevant
feedback would be published together with the final results of the consultation.
© 2019 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.BACKGROUND & OBJECTIVE
In India, capital gains are taxed for securities including the ones which are received
as part of stock dividend.

▪ Long Term Capital gains are taxed at 10% (applicable on securities held for a period exceeding
12 months)**▪ Short Term Capital gains are taxed at 15% (applicable on securities held for a period less than
12 months)

Currently, the methodology does not take into account tax on capital gains in theMSCI Indexes.

For market neutral events such as stock dividend, Capital gains tax creates issue intracking and replicability of Indian securities in the MSCI Indexes.
** Long Term Capital gains tax is being levied since April 01, 2018.

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STOCK DIVIDENDS POST LAW AMENDMENT (01-Apr-2018)MSCI code

NameIndex Family

Ex dateTerms

92096.01
23619.01
32809.01
29933.01
80359.01
66472.01
30377.01
22728.01
28126.01
33384.01
33714.01
22734.01
33371.01
67991.01
82000.01
60413.0160359.01
63883.01
22726.01
66495.01
29344.01

VARUN BEVERAGESGAIL INDIA
UPL
BIOCON LTD
SYNGENE INTERNATIONALTTK PRESTIGENTPCWIPROCONTAINER CORP OF INDIA
MOTHERSON SUMI SYSTEMSGODREJ CONSUMER PRDCTS
INFOSYSKARUR VYSYA BANKASHOKA BUILDCONMINDA INDUSTRIESCITY UNION BANKJYOTHY LABORATORIESJUBILANT FOODWORKSESSEL PROPACK
GRUH FINANCE
TATA CONSULTANCY

Small
Standard
Standard
Standard
Small
Small
Standard
Standard
Standard
Standard
Standard
Standard
Small
Small
Small
Small
Small
Small
Small
Small
Standard

25-Jul-19
9-Jul-19
2-Jul-19
12-Jun-19
11-Jun-19
15-May-19
19-Mar-19
6-Mar-19
4-Feb-19
30-Oct-18
12-Sep-18
4-Sep-18
14-Aug-18
12-Jul-18
11-Jul-18
10-Jul-18
28-Jun-1821-Jun-18
20-Jun-18
6-Jun-18
31-May-18

S1:2
S1:1
S1:2
S1:1
S1:1
S1:5
S1:5
S1:3
S1:4
S1:2
S1:2
S1:1
S 1 : 10
S1:2
S2:1
S 1 : 10
S1:1
S1:1
S1:1
S1:1
S1:1

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POTENTIAL IMPACTMSCI ACWI IMIName

Ex dateMSCI INDIA

Index impact Index impact Index impact Index impact
(10%)
(15%)
(10%)
(15%)

Name

Ex dateIndex impact Index impact Index impact Index impact
(10%)
(15%)
(10%)
(15%)

GAIL INDIA
UPL

9-Jul-19
2-Jul-19

0.0133%0.0130%0.0199%0.0195%-0.0042%0.0130%-0.0063%0.0195%-0.0001%

BIOCON LTD
NTPC

12-Jun-19
19-Mar-19

0.0041%0.0061%0.0062%0.0091%-0.0021%-0.0003%-0.0032%-0.0005%

0.0000%0.0000%WIPRO

6-Mar-19

0.0126%0.0189%0.0106%0.0159%0.0000%0.0000%0.0002%0.0000%0.0000%CONTAINER CORP OF INDIA
4-Feb-19
MOTHERSON SUMI SYSTEMS 30-Oct-18

0.0027%0.0068%0.0040%0.0102%-0.0152%-0.0098%-0.0227%-0.0147%0.0003%0.0002%0.0003%GODREJ CONSUMER PRDCTS 12-Sep-18

0.0123%0.0185%0.0105%0.0157%4-Sep-18

0.1459%0.2189%0.1056%0.1584%31-May-18

0.0982%0.1473%0.0536%0.0804%

VARUN BEVERAGES

25-Jul-19

0.0000%0.0000%0.0000%0.0000%GAIL INDIA

9-Jul-19

0.0002%0.0004%-0.0001%-0.0001%

UPL

2-Jul-19

0.0002%0.0004%0.0002%0.0004%

BIOCON LTD

12-Jun-19

0.0001%0.0001%0.0000%SYNGENE INTERNATIONAL

11-Jun-19

0.0000%0.0001%TTK PRESTIGE

15-May-19

0.0000%0.0000%

NTPC19-Mar-19

0.0001%WIPRO

6-Mar-19

0.0002%

4-Feb-19

0.0000%0.0001%-0.0003%-0.0004%

INFOSYS

MOTHERSON SUMI SYSTEMS 30-Oct-18

0.0001%0.0002%-0.0002%-0.0003%

TATA CONSULTANCYGODREJ CONSUMER PRDCTS 12-Sep-18

0.0002%0.0003%0.0002%0.0003%

Total Impact

INFOSYS

4-Sep-18

0.0027%0.0040%0.0019%0.0029%KARUR VYSYA BANK

14-Aug-18

0.0000%0.0000%0.0000%0.0000%ASHOKA BUILDCON

12-Jul-18

0.0000%0.0000%0.0000%0.0000%MINDA INDUSTRIES

11-Jul-18

0.0000%0.0001%

0.0000%0.0000%Assumptions:✓ Both original and bonus shares are sold on ex-date.
✓ 10% applied as per Long term capital gains tax rate
✓ 15% as per Short term capital gains tax rate

CITY UNION BANK

10-Jul-18

0.0000%0.0000%0.0000%0.0000%JYOTHY LABORATORIES

28-Jun-18

0.0000%0.0000%0.0000%0.0000%JUBILANT FOODWORKS

21-Jun-18

0.0001%0.0001%0.0001%0.0001%ESSEL PROPACK

20-Jun-18

0.0000%0.0000%0.0000%0.0000%GRUH FINANCE

6-Jun-18

0.0001%0.0001%0.0001%0.0001%

TATA CONSULTANCY

31-May-18

0.0018%0.0026%0.0010%0.0014%

CONTAINER CORP OF INDIA

Total Impact

0.0060%0.0090%0.0031%0.0047%0.3151%0.4726%0.1617%0.2425%

Scenario 1:
Impact calculated assuming tax is paid only on the bonus share.
Gain/Loss on original share is not considered.
Scenario 2:
Impact calculated based on net gain calculated if original and bonus
shares are sold together.

*** Please note that this slide has been updated and replaces the earlier slide from September 09, 2019.

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PROPOSAL▪ In order to account for capital gains tax, MSCI is proposing to apply awithholding tax of 10% on the ex-date of stock dividend for securities listedin India.

▪ This tax of 10% will be applied only in case of stock dividend of new sharesin the same company.

▪ MSCI proposes to make an adjustment to the MSCI Net Daily Total Return(DTR) Indexes to reflect this withholding tax. This adjustment will bereflected simultaneously with the Price Adjustment Factor (PAF) on the exdate of the stock dividend.

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DISCUSSION POINTS▪

Do you agree that MSCI should apply a withholding tax (WHT) for stock
dividends of Indian securities?

▪

Is it a concern that this proposal would only impact stock dividend of sharesof the same company and will not impact distribution of other type of asset(bonds, warrants etc.) or shares in other company (including spin-offs).

▪

In case of withholding tax to be applied, should MSCI apply a tax of 10% or
15% for stock dividends?

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