Demerger of foreign company shares in an Indian company may be treated as not a transfer under specified conditions. Transfer of shares held in an Indian company by a demerged foreign company to the resulting foreign company is not regarded as a transfer in a demerger, subject to continuity of shareholding by shareholders holding not less than 75% in value and the condition that the transfer does not attract capital gains tax in the country of incorporation of the demerged foreign company. The shares of the Indian company remain the relevant capital asset, and the transferee takes the cost of acquisition as that of the previous owner.