Tata Motors demerger: What happens if you sell the stocks immediately? A look at real investor tax impact

As Tata Motors’ commercial vehicles arm lists independently today, millions of shareholders are trying to understand one crucial question: What happens if you sell the two new shares immediately?

With 66.5 lakh investors now holding separate stock in the Commercial Vehicles Company (TMCV) and the Passenger Vehicles Company (TMPV), the financial outcome after the demerger depends heavily on how the cost is apportioned—something many retail investors overlook.

Under the 1:1 demerger, shareholders received one share of TMCV and one share of TMPV for every Tata Motors share held on the record date of October 14, 2025. The company later declared the official cost allocation: 31.15% for TMCV and 68.85% for TMPV, a ratio that directly affects capital gains.

Tax professional Sujit Bangar breaks down what happens if investors decide to sell both shares on Day 1.

Stock split

If a shareholder had bought 1,000 ordinary Tata Motors shares at Rs 400 each, the total pre-demerger acquisition cost would be Rs 4,00,000. Under the Share Entitlement Ratio, the shareholder would receive 1,000 shares of TMLCVL. This total cost of Rs 4,00,000 would then be distributed according to the prescribed ratio: Rs 1,24,600 (31.15% of the total) would be assigned to the 1,000 shares of the Resulting Company, while the remaining Rs 2,75,400 would be attributed to the shareholder’s 1,000 original shares of the Demerged Company.

The sale scenario

For illustration, let’s assume an investor originally bought 1,000 Tata Motors shares at ₹660 each, costing ₹6,60,000. After applying the official ratio: > Cost allocated to TMCV: Rs 2,05,590 > Cost allocated to TMPV: Rs 4,54,410 Now, suppose the investor sells immediately at today’s market prices:

TMCV trading at Rs 318 → Sale value = Rs 3,18,000 TMPV trading at Rs 391 → Sale value = Rs 3,91,000

Outcome: A mixed bag

The two newly listed shares do not behave identically. As Bangar explains, “You may have gains in the CV entity but a loss in the PV entity. Investors need to compute both before making a decision.” Here’s how the numbers work out:

TMCV Gain

Sale value: Rs 3,18,000 Cost: Rs 2,05,590 Profit: Rs 1,12,410

TMPV Loss

Sale value: Rs 3,91,000 Cost: Rs 4,54,410 Loss: Rs 63,410

The combined effect?

Net Long-Term Capital Gain = Rs 49,000

Why the loss in PV and gain in CV?

TMCV’s independent listing sparked strong early-day volumes as investors looked to price the leaner, standalone commercial vehicles business. TMPV—which includes the PV, EV, and JLR units—saw initial pressure as markets recalibrated valuations based on differing growth trajectories and capital requirements.

Tax angle

Bangar clarifies an important rule many investors miss: the holding period of both TMCV and TMPV shares is counted from the date of purchase of the original Tata Motors shares, not the demerger date. This determines whether the tax treatment falls under:

Long-Term Capital Gains (LTCG), taxed at 10%

Short-Term Capital Gains (STCG), taxed at 15%

While the demerger has unlocked strategic clarity for Tata Motors, the tax outcome for investors depends on careful computation. An immediate sale may show a profit in one company and a loss in the other, and the final tax bill hinges on how these offset.

For millions of shareholders, understanding this post-demerger math is essential—because selling “blindly” on listing day could mean missing out on legitimate tax benefits or misreporting gains.